Company: EQUITY RESIDENTIAL
CIK: 906107
SIC: 6798
Filing Date: 2011-02-24 00:00:00

ITEM 1 - BUSINESS
Item 1.
Business
General
Equity Residential (“EQR”), a Maryland real estate investment trust (“REIT”) formed in March 1993, is an S&P 500 company focused on the acquisition, development and management of high quality apartment properties in top United States growth markets. EQR has elected to be taxed as a REIT.
The Company is one of the largest publicly traded real estate companies and is the largest publicly traded owner of multifamily properties in the United States (based on the aggregate market value of its outstanding Common Shares, the number of apartment units wholly owned and total revenues earned). The Company’s corporate headquarters are located in Chicago, Illinois and the Company also operates property management offices in each of its markets.
EQR is the general partner of, and as of December 31, 2010 owned an approximate 95.5% ownership interest in, ERP Operating Limited Partnership, an Illinois limited partnership (the “Operating Partnership”). All of EQR’s property ownership, development and related business operations are conducted through the Operating Partnership and its subsidiaries. References to the “Company” include EQR, the Operating Partnership and those entities owned or controlled by the Operating Partnership and/or EQR.
As of December 31, 2010, the Company, directly or indirectly through investments in title holding entities, owned all or a portion of 451 properties located in 17 states and the District of Columbia consisting of 129,604 apartment units. The ownership breakdown includes (table does not include various uncompleted development properties):
As of December 31, 2010, the Company had approximately 4,000 employees who provided real estate operations, leasing, legal, financial, accounting, acquisition, disposition, development and other support functions.
Certain capitalized terms used herein are defined in the Notes to Consolidated Financial Statements. See also Note 19 in the Notes to Consolidated Financial Statements for additional discussion regarding the Company’s segment disclosures.
Available Information
You may access our Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q, our Current Reports on Form 8-K and any amendments to any of those reports we file with the SEC free of charge at our website, www.equityresidential.com. These reports are made available at our website as soon as reasonably practicable after we file them with the SEC.
Business Objectives and Operating and Investing Strategies
The Company invests in apartment communities located in strategically targeted markets with the goal of maximizing our risk adjusted total return (operating income plus capital appreciation) on invested capital.
Our operating focus is on balancing occupancy and rental rates to maximize our revenue while exercising tight cost control to generate the highest possible return to our shareholders. Revenue is maximized by driving qualified resident prospects to our properties, converting this traffic cost-effectively into new leases at the highest rent possible, keeping our residents satisfied and renewing their leases at yet higher rents. While we believe that it is our high-quality, well-located assets that bring our customers to us, it is our customer service that keeps them renting with us and recommending us to their friends.
We use technology to engage our customers in the way that they want to be engaged. Many of our residents utilize our web-based resident portal which allows them to review their account and make payments, provide feedback and make service requests on-line.
We seek to maximize capital appreciation of our properties by investing in markets that are characterized by conditions favorable to multifamily property appreciation. These markets generally feature one or more of the following:
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High barriers to entry where, because of land scarcity or government regulation, it is difficult or costly to build new apartment properties leading to low supply;
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High single family home prices making our apartments a more economical housing choice;
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Strong economic growth leading to household formation and job growth, which in turn leads to high demand for our apartments; and
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An attractive quality of life leading to high demand and retention and allowing us to more readily increase rents.
Acquisitions and developments may be financed from various sources of capital, which may include retained cash flow, issuance of additional equity and debt securities, sales of properties, joint venture agreements and collateralized and uncollateralized borrowings. In addition, the Company may acquire properties in transactions that include the issuance of limited partnership interests in the Operating Partnership (“OP Units”) as consideration for the acquired properties. Such transactions may, in certain circumstances, enable the sellers to defer, in whole or in part, the recognition of taxable income or gain that might otherwise result from the sales. EQR may also acquire land parcels to hold and/or sell based on market opportunities. The Company may also seek to acquire properties by purchasing defaulted or distressed debt that encumbers desirable properties in the hope of obtaining title to property through foreclosure or deed-in-lieu of foreclosure proceedings. The Company has also, in the past, converted some of its properties and sold them as condominiums but is not currently active in this line of business.
The Company primarily sources the funds for its new property acquisitions in its core markets with the sales proceeds from selling assets that are older or located in non-core markets. During the last five years, the Company has sold over 97,000 apartment units for an aggregate sales price of $7.2 billion and acquired nearly 25,000 apartment units in its core markets for approximately $5.5 billion. We are currently acquiring and developing assets primarily in the following targeted metropolitan areas: Boston, New York, Washington DC, South Florida, Southern California, San Francisco, Seattle and to a lesser extent Denver. We also have investments (in the aggregate about 18% of our NOI) in other markets including Atlanta, Phoenix, Portland, Oregon, New England excluding Boston, Tampa, Orlando and Jacksonville but do not intend to acquire or develop assets in these markets.
As part of its strategy, the Company purchases completed and fully occupied apartment properties, partially completed or partially unoccupied properties or land on which apartment properties can be constructed. We intend to hold a diversified portfolio of assets across our target markets. Currently, no single metropolitan area accounts for more than 17% of our NOI, though no guarantee can be made that NOI concentration may not increase in the future.
We endeavor to attract and retain the best employees by providing them with the education, resources and opportunities to succeed. We provide many classroom and on-line training courses to assist our employees in interacting with prospects and residents as well as extensively train our customer service specialists in maintaining the equipment and appliances on our property sites. We actively promote from within and many senior corporate and property leaders have risen from entry level or junior positions. We monitor our employees’ engagement by surveying them annually and have consistently received high engagement scores.
We have a commitment to sustainability and consider the environmental impacts of our business activities. With its high density, multifamily housing is, by its nature, an environmentally friendly property type. Our recent acquisition and development activities have been primarily concentrated in pedestrian-friendly urban locations near public transportation. When developing and renovating our properties, we strive to reduce energy and water usage by investing in energy saving technology while positively impacting the experience of our residents and the value of our assets. We continue to implement a combination of irrigation, lighting and HVAC improvements at our properties that will reduce energy and water consumption.
Debt and Equity Activity
Please refer to Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, for the Company’s Capital Structure chart as of December 31, 2010.
Major Debt and Equity Activities for the Years Ended December 31, 2010, 2009 and 2008
During 2010:
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The Operating Partnership issued $600.0 million of ten-year 4.75% fixed rate public notes in a public offering at an all-in effective interest rate of 5.09%, receiving net proceeds of $595.4 million before underwriting fees and other expenses.
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The Company issued 2,506,645 Common Shares pursuant to its Share Incentive Plans and received net proceeds of approximately $71.6 million.
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The Company issued 157,363 Common Shares pursuant to its Employee Share Purchase Plan and received net proceeds of approximately $5.1 million.
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The Company issued 6,151,198 Common Shares at an average price of $47.45 per share for total consideration of $291.9 million pursuant to its At-The-Market (“ATM”) share offering program. See Note 3 in the Notes to Consolidated Financial Statements for further discussion.
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The Company repurchased and retired 58,130 of its Common Shares at an average price of $32.46 per share for total consideration of $1.9 million (all related to the vesting of employee restricted shares). See Note 3 in the Notes to Consolidated Financial Statements for further discussion.
During 2009:
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The Operating Partnership obtained $500.0 million of mortgage loan proceeds through the issuance of an 11 year (stated maturity date of July 1, 2020) cross-collateralized loan with an all-in fixed interest rate for 10 years at approximately 5.6% secured by 13 properties.
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The Company issued 422,713 Common Shares pursuant to its Share Incentive Plans and received net proceeds of approximately $9.1 million.
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The Company issued 324,394 Common Shares pursuant to its Employee Share Purchase Plan and received net proceeds of approximately $5.3 million.
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The Company issued 3,497,300 Common Shares at an average price of $35.38 per share for total consideration of $123.7 million pursuant to its ATM share offering program. See Note 3 in the Notes to Consolidated Financial Statements for further discussion.
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The Company repurchased and retired 47,450 of its Common Shares at an average price of $23.69 per share for total consideration of $1.1 million (all related to the vesting of employee restricted shares). See Note 3 in the Notes to Consolidated Financial Statements for further discussion.
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The Company repurchased $75.8 million of its 5.20% fixed rate tax-exempt notes.
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The Company repurchased at par $105.2 million of its 4.75% fixed rate public notes due June 15, 2009. In addition, the Company repaid the remaining $122.2 million of its 4.75% fixed rate public notes at maturity. See Note 9 in the Notes to Consolidated Financial Statements for further discussion.
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The Company repurchased $185.2 million at par and $21.7 million at a price of 106% of par of its 6.95% fixed rate public notes due March 2, 2011. See Note 9 in the Notes to Consolidated Financial Statements for further discussion.
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The Company repurchased $146.1 million of its 6.625% fixed rate public notes due March 15, 2012 at a price of 108% of par. See Note 9 in the Notes to Consolidated Financial Statements for further discussion.
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The Company repurchased $127.9 million of its 5.50% fixed rate public notes due October 1, 2012 at a price of 107% of par. See Note 9 in the Notes to Consolidated Financial Statements for further discussion.
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The Company repurchased $17.5 million of its 3.85% convertible fixed rate public notes due August 15, 2026 (putable in 2011) at a price of 88.4% of par. In addition, the Company repurchased $48.5 million of these notes at par. See Note 9 in the Notes to Consolidated Financial Statements for further discussion.
During 2008:
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The Operating Partnership obtained $500.0 million of mortgage loan proceeds through the issuance of an 11.5 year (stated maturity date of October 1, 2019) cross-collateralized loan with a fixed stated interest rate for 10.5 years at 5.19% secured by 13 properties.
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The Operating Partnership obtained $550.0 million of mortgage loan proceeds through the issuance of an 11.5 year (stated maturity date of March 1, 2020) cross-collateralized loan with a fixed stated interest rate for 10.5 years at approximately 6% secured by 15 properties.
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The Operating Partnership obtained $543.0 million of mortgage loan proceeds through the issuance of an 8 year (stated maturity date of January 1, 2017) cross-collateralized loan with a fixed stated interest rate for 7 years at approximately 6% secured by 18 properties.
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The Company issued 995,129 Common Shares pursuant to its Share Incentive Plans and received net proceeds of approximately $24.6 million.
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The Company issued 195,961 Common Shares pursuant to its Employee Share Purchase Plan and received net proceeds of approximately $6.2 million.
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The Company repurchased and retired 220,085 of its Common Shares at an average price of $35.93 per share for total consideration of $7.9 million. See Note 3 in the Notes to Consolidated Financial Statements for further discussion.
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The Company repurchased $72.6 million of its 4.75% fixed rate public notes due June 15, 2009 at a price of 99.0% of par. See Note 9 in the Notes to Consolidated Financial Statements for further discussion.
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The Company repurchased $101.4 million of its 3.85% convertible fixed rate public notes due August 15, 2026 (putable in 2011) at a price of 82.3% of par. See Note 9 in the Notes to Consolidated Financial Statements for further discussion.
During the first quarter of 2011 through January 13, 2011, the Company has issued approximately 3.0 million Common Shares at an average price of $50.84 per share for total consideration of approximately $154.5 million through the ATM share offering program. The Company has not issued any shares under this program since January 13, 2011.
An unlimited amount of equity and debt securities remains available for issuance by EQR and the Operating Partnership under effective shelf registration statements filed with the SEC. Most recently, EQR and the Operating Partnership filed a universal shelf registration statement for an unlimited amount of equity and debt securities that became automatically effective upon filing with the SEC in October 2010 (under SEC regulations enacted in 2005, the registration statement automatically expires on October 14, 2013 and does not contain a maximum issuance amount). However, as of February 16, 2011, issuances under the ATM share offering program are limited to 10,000,000 additional shares.
In May 2002, the Company’s shareholders approved the Company’s 2002 Share Incentive Plan. In January 2003, the Company filed a Form S-8 registration statement to register 23,125,828 Common Shares under this plan. As of January 1, 2011, 22,785,696 shares are the maximum shares issuable under this plan. See Note 14 in the Notes to Consolidated Financial Statements for further discussion.
Credit Facilities
The Operating Partnership has a $1.425 billion (net of $75.0 million which had been committed by a now bankrupt financial institution and is not available for borrowing) unsecured revolving credit facility maturing on February 28, 2012, with the ability to increase available borrowings by an additional $500.0 million by adding additional banks to the facility or obtaining the agreement of existing banks to increase their commitments. Advances under the credit facility bear interest at variable rates based upon LIBOR at various interest periods plus a spread (currently 0.50%) 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.
As of December 31, 2010, the amount available on the credit facility was $1.28 billion (net of $147.3 million which was restricted/dedicated to support letters of credit and net of the $75.0 million discussed above) and there was no amount outstanding. During the year ended December 31, 2010, the weighted average interest rate was 0.66%. As of December 31, 2009, the amount available on the credit facility was $1.37 billion (net of $56.7 million which was restricted/dedicated to support letters of credit and net of the $75.0 million discussed above). The Company did not draw and had no balance outstanding on its revolving credit facility at any time during the year ended December 31, 2009.
Competition
All of the Company’s properties are located in developed areas that include other multifamily properties. The number of competitive multifamily properties in a particular area could have a material effect on the Company’s ability to lease apartment units at the properties or at any newly acquired properties and on the rents charged. The Company may be competing with other entities that have greater resources than the Company and whose managers have more experience than the Company’s managers. In addition, other forms of rental properties and single family housing provide housing alternatives to potential residents of multifamily properties. See

ITEM 1A - RISK FACTORS
Item 1A.
Risk Factors
General
The following Risk Factors may contain defined terms that are different from those used in the other sections of this report. Unless otherwise indicated, when used in this section, the terms “we” and “us” refer to Equity Residential and its subsidiaries, including ERP Operating Limited Partnership. This Item 1A. includes forward-looking statements. You should refer to our discussion of the qualifications and limitations on forward-looking statements included in Item 7.
The occurrence of the events discussed in the following risk factors could adversely affect, possibly in a material manner, our business, financial condition or results of operations, which could adversely affect the value of our common shares of beneficial interest or preferred shares of beneficial interest (which we refer to collectively as “Shares”), limited partnership interests in the Operating Partnership (“OP Units”) and Long Term Incentive Plan Units (“LTIP Units”). In this section, we refer to the Shares, OP Units and LTIP Units together as our “securities” and the investors who own Shares and/or OP/LTIP Units as our “security holders”.
Our Performance and Securities Value are Subject to Risks Associated with the Real Estate Industry
General
Real property investments are subject to varying degrees of risk and are relatively illiquid. Numerous factors may adversely affect the economic performance and value of our properties and the ability to realize that value. These factors include changes in the global, national, regional and local economic climates, local conditions such as an oversupply of multifamily properties or a reduction in demand for our multifamily properties, the attractiveness of our properties to residents, competition from other multifamily properties and single family homes and changes in market rental rates. Our performance also depends on our ability to collect rent from residents and to pay for adequate maintenance, insurance and other operating costs, including real estate taxes, all of which could increase over time. Sources of labor and materials required for maintenance, repair, capital expenditure or development may be more expensive than anticipated. Also, the expenses of owning and operating a property are not necessarily reduced when circumstances such as market factors and competition cause a reduction in income from the property.
We May Not Have Sufficient Cash Flows From Operations After Capital Expenditures to Cover Our Distributions and Our New Dividend Policy May Lead to Quicker Dividend Reductions
We generally consider our cash flows provided by operating activities after capital expenditures to be adequate to meet operating requirements and payment of distributions to our security holders. However, there may be times when we experience shortfalls in our coverage of distributions, which may cause us to consider reducing our distributions and/or using the proceeds from property dispositions or additional financing transactions to make up the difference. Should these shortfalls occur for lengthy periods of time or be material in nature, our financial condition may be adversely affected and we may not be able to maintain our current distribution levels. While our new dividend policy makes it less likely we will over distribute, it will also lead to a dividend reduction more quickly than in the past should operating results deteriorate. See Item 7 for additional discussion regarding our new dividend policy.
We May Be Unable to Renew Leases or Relet Apartment Units as Leases Expire
When our residents decide not to renew their leases upon expiration, we may not be able to relet their apartment units. Even if the residents do renew or we can relet the apartment units, the terms of renewal or reletting may be less favorable than current lease terms. If we are unable to promptly renew the leases or relet the apartment units, or if the rental rates upon renewal or reletting are significantly lower than expected rates, then our results of operations and financial condition will be adversely affected. Occupancy levels and market rents may be adversely affected by national and local economic and market conditions including, without limitation, new construction and excess inventory of multifamily and single family housing, slow or negative employment growth, availability of low interest mortgages for single family home buyers and the potential for geopolitical instability, all of which are beyond the Company’s control. In addition, various state and local municipalities are considering and may continue to consider rent control legislation which could limit our ability to raise rents. Finally, the federal government’s policies, many of which may encourage home ownership, can increase competition and possibly limit our ability to raise rents. Consequently, our cash flow and ability to service debt and make distributions to security holders could be reduced.
New Acquisitions and/or Development Projects May Fail to Perform as Expected and Competition for Acquisitions May Result in Increased Prices for Properties
We intend to actively acquire and/or develop multifamily properties for rental operations as market conditions dictate. We may also acquire multifamily properties that are unoccupied or in the early stages of lease up. We may be unable to lease up these apartment properties on schedule, resulting in decreases in expected rental revenues and/or lower yields due to lower occupancy and rates as well as higher than expected concessions. We may underestimate the costs necessary to bring an acquired property up to standards established for its intended market position or to complete a development 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 (or lack thereof) may
increase (or depress) prices for multifamily properties. We may not be in a position or have the opportunity in the future to make suitable property acquisitions on favorable terms. The total number of development units, costs 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.
In connection with such government regulation, we may incur liability if our properties are not constructed and operated in compliance with the accessibility provisions of the Americans with Disabilities Act, the Fair Housing Act or other federal, state or local requirements. Noncompliance could result in fines, subject us to lawsuits and require us to remediate or repair the noncompliance.
Risks Involved in Real Estate Activity Through Joint Ventures
We have in the past and may in the future develop and acquire properties in joint ventures with other persons or entities when we believe circumstances warrant the use of such structures. Joint venture investments involve risks, including the possibility that our partners might refuse to make capital contributions when due; that we may be responsible to our partner for indemnifiable losses; that our partner might at any time have business or economic goals which are inconsistent with ours; and that our partner may be in a position to take action or withhold consent contrary to our instructions or requests. Frequently, we and our partner may each have the right to trigger a buy-sell arrangement, which could cause us to sell our interest, or acquire our partner’s interest, at a time when we otherwise would not have initiated such a transaction. In some instances, joint venture partners may have competing interests in our markets that could create conflicts of interest. Further, the Company’s joint venture partners may experience financial distress and to the extent they do not meet their obligations to us or our joint ventures with them, we may be adversely affected.
Because Real Estate Investments Are Illiquid, We May Not Be Able to Sell Properties When Appropriate
Real estate investments generally cannot be sold quickly. We may not be able to reconfigure our portfolio promptly in response to economic or other conditions. This inability to reallocate our capital promptly could adversely affect our financial condition and ability to make distributions to our security holders.
The Value of Investment Securities Could Result In Losses to the Company
From time to time, the Company holds investment securities and/or cash investments that have a higher risk profile than the government obligations and bond funds, money market funds or bank deposits in which we generally invest. On occasion we may purchase securities of companies in our own industry as a means to invest funds. There may be times when we experience declines in the value of these investment securities, which may result in losses to the Company and our financial condition or results of operations could be adversely affected. Sometimes the cash we deposit at a bank exceeds the FDIC insurance limit resulting in risk to the Company of loss of funds if these banks fail.
Changes in Market Conditions and Volatility of Share Prices Could Adversely Affect the Market Price of Our Common Shares
The stock markets, including the New York Stock Exchange, on which we list our Common Shares, have experienced significant price and volume fluctuations. As a result, the market price of our Common Shares could be similarly volatile, and investors in our Common Shares may experience a decrease in the value of their shares, including decreases unrelated to our operating performance or prospects. The market price of our Common Shares may decline or fluctuate significantly in response to many factors, including but not limited to the following:
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general market and economic conditions;
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actual or anticipated variations in our quarterly operating results or dividends;
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changes in our funds from operations, normalized funds from operations or earnings estimates;
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difficulties or inability to access capital or extend or refinance debt;
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decreasing (or uncertainty in) real estate valuations;
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a change in analyst ratings;
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adverse market reaction to any additional debt we incur in the future;
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governmental regulatory action, including changes or proposed changes to the mandates of Fannie Mae or Freddie Mac, and changes in tax laws; and
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the issuance of additional Common Shares, or the perception that such issuances might occur, including under our ATM program.
Changes in Laws and Litigation Risk Could Affect Our Business
We are generally not able to pass through to our residents under existing leases any real estate or other federal, state or local taxes. Consequently, any such tax increases may adversely affect our financial condition and limit our ability to make distributions to our security holders.
We may become involved in legal proceedings, including but not limited to, proceedings related to consumer, employment, development, condominium conversion, tort and commercial legal issues that, if decided adversely to or settled by us, could result in liability material to our financial condition or results of operations.
Any Weaknesses Identified in Our Internal Control Over Financial Reporting Could Have an Adverse Effect on Our Share Price
Section 404 of the Sarbanes-Oxley Act of 2002 requires us to evaluate and report on our internal control over financial reporting. If we identify one or more material weaknesses in our internal control over financial reporting, we could lose investor confidence in the accuracy and completeness of our financial reports, which in turn could have an adverse effect on our share price.
Environmental Problems Are Possible and Can Be Costly
Federal, state and local laws and regulations relating to the protection of the environment may require a current or previous owner or operator of real estate to investigate and clean up hazardous or toxic substances or petroleum product releases at such property. The owner or operator may have to pay a governmental entity or third parties for property damage and for investigation and clean-up costs incurred by such parties in connection with the contamination. These laws typically impose clean-up responsibility and liability without regard to whether the owner or operator knew of or caused the presence of the contaminants. Even if more than one person may have been responsible for the contamination, each person covered by the environmental laws may be held responsible for all of the clean-up costs incurred. In addition, third parties may sue the owner or operator of a site for damages and costs resulting from environmental contamination emanating from that site.
Substantially all of our properties have been the subject of environmental assessments completed by qualified independent environmental consulting companies. While these environmental assessments have not revealed, nor are we aware of, any environmental liability that our management believes would have a material adverse effect on our business, results of operations, financial condition or liquidity, there can be no assurance that we will not incur such liabilities in the future.
There have been an increasing number of lawsuits against owners and managers of multifamily properties alleging personal injury and property damage caused by the presence of mold in residential real estate. As some of these lawsuits have resulted in substantial monetary judgments or settlements, insurance carriers have reacted by excluding mold-related claims from standard policies and pricing mold endorsements at prohibitively high rates. While we have adopted programs designed to minimize the existence of mold in any of our properties as well as guidelines for promptly addressing and resolving reports of mold to minimize any impact mold might have on our residents or the property, should mold become an issue in the future, our financial condition or results of operations may be adversely affected.
We cannot be assured that existing environmental assessments of our properties reveal all environmental liabilities, that any prior owner of any of our properties did not create a material environmental condition not known to us, or that a material environmental condition does not otherwise exist as to any of our properties.
Climate Change
To the extent that climate change does occur, we may experience extreme weather and changes in precipitation and temperature, all of which may result in physical damage or a decrease in demand for properties located in these areas or affected by these conditions. Should the impact of climate change be material in nature, including destruction of our properties, or occur for lengthy periods of time, our financial condition or results of operations may be adversely affected.
In addition, changes in federal and state legislation and regulation on climate change could result in increased capital expenditures to improve the energy efficiency of our existing properties and could also require us to spend more on our new development properties without a corresponding increase in revenue.
Insurance Policy Deductibles, Exclusions and Counterparties
As of December 31, 2010, the Company’s property insurance policy provides for a per occurrence deductible of $250,000 and self-insured retention of $5.0 million per occurrence, subject to a maximum annual aggregate self-insured retention of $7.5 million, with approximately 80% of any excess losses being covered by insurance. Any earthquake and named windstorm losses are subject to a deductible of 5% of the values of the buildings involved in the losses and are not subject to the aggregate self-insured retention. The Company’s general liability and worker’s compensation policies at December 31, 2010 provide for a $2.0 million and $1.0 million per occurrence deductible, respectively. These higher deductible and self-insured retention amounts do expose the Company to greater potential uninsured losses, but management has reviewed its claims history over the years and believes the savings in insurance premium expense justify this potential increased exposure over the long-term. However, the potential impact of climate change and increased severe weather could cause a significant increase in insurance premiums and deductibles, particularly for our coastal properties, or a decrease in the availability of coverage, either of which could expose the Company to even greater uninsured losses which may adversely affect our financial condition or results of operations.
As a result of the terrorist attacks of September 11, 2001, property insurance carriers created exclusions for losses from terrorism from our “all risk” property insurance policies. As of December 31, 2010, the Company was insured for $500.0 million in terrorism insurance coverage, with a $100,000 deductible. This coverage excludes losses from nuclear, biological and chemical attacks. In the event of a terrorist attack impacting one or more of our properties, we could lose the revenues from the property, our capital investment in the property and possibly face liability claims from residents or others suffering injuries or losses. The Company has become more susceptible to large losses as it has transformed its portfolio, becoming more concentrated in fewer, more valuable assets over a smaller geographical footprint.
In addition, the Company relies on third party insurance providers for its property, general liability and worker’s compensation insurance. While there has yet to be any non-performance by these major insurance providers, should any of them experience liquidity issues or other financial distress, it could negatively impact the Company.
Non-Performance by Our Operating Counterparties Could Adversely Affect Our Performance
We have relationships with and, from time to time, we execute transactions with or receive services from many counterparties. As a result, defaults by counterparties could result in services not being provided, or volatility in the financial markets could affect counterparties’ ability to complete transactions with us as intended, both of which could result in disruptions to our operations that may adversely affect our business and results of operations.
Debt Financing and Preferred Shares Could Adversely Affect Our Performance
General
Please refer to Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, for the Company’s total debt and unsecured debt summaries as of December 31, 2010.
In addition to debt, we have $200.0 million of combined liquidation value of outstanding preferred shares of beneficial interest with a weighted average dividend preference of 6.93% per annum as of December 31, 2010. Our use of debt and preferred equity financing creates certain risks, including the following:
Disruptions in the Financial Markets Could Adversely Affect Our Ability to Obtain Debt Financing and Impact our Acquisitions and Dispositions
Dislocations and liquidity disruptions in capital and credit markets could impact liquidity in the debt markets, resulting in financing terms that are less attractive to us and/or the unavailability of certain types of debt financing. Should the capital and credit markets experience volatility and the availability of funds again become limited, or be available only on unattractive terms, we will incur increased costs associated with issuing debt instruments. In addition, it is possible that our ability to access the capital and credit markets may be limited or precluded by these or other factors at a time when we would like, or need, to do so, which would adversely impact our ability to refinance maturing debt and/or react to changing economic and business conditions. Uncertainty in the credit markets could negatively impact our ability to make acquisitions and make it more difficult or not possible for us to sell properties or may adversely affect the price we receive for properties that we do sell, as prospective buyers may experience increased costs of debt financing or difficulties in obtaining debt financing. Potential continued disruptions in
the financial markets could also have other unknown adverse effects on us or the economy generally and may cause the price of our Common Shares to fluctuate significantly and/or to decline.
Potential Reforms to Fannie Mae and Freddie Mac Could Adversely Affect Our Performance
There is significant uncertainty surrounding the futures of Fannie Mae and Freddie Mac. Should Fannie Mae and Freddie Mac have their mandates changed or reduced, be disbanded or reorganized by the government or otherwise discontinue providing liquidity to our sector, it would significantly reduce our access to debt capital and/or increase borrowing costs and would significantly reduce our sales of assets and/or the values realized upon sale. Disruptions in the floating rate tax-exempt bond market (where interest rates reset weekly) and in the credit market’s perception of Fannie Mae and Freddie Mac, which guarantee and provide liquidity for these bonds, have been experienced in the past and may be experienced in the future and could result in an increase in interest rates on these debt obligations. These bonds could also be put to our consolidated subsidiaries if Fannie Mae or Freddie Mac fail to satisfy their guaranty obligations. While this obligation is in almost all cases non-recourse to us, this could cause the Company to have to repay these obligations on short notice or risk foreclosure actions on the collateralized assets.
Non-Performance by Our Financial Counterparties Could Adversely Affect Our Performance
Although we have not experienced any material counterparty non-performance, disruptions in financial and credit markets could, among other things, impede the ability of our counterparties to perform on their contractual obligations. There are multiple financial institutions that are individually committed to lend us varying amounts as part of our revolving credit facility. Should any of these institutions fail to fund their committed amounts when contractually required, our financial condition could be adversely affected. Should several of these institutions fail to fund, we could experience significant financial distress. One of the financial institutions, with a commitment of $75.0 million, declared bankruptcy in 2008 and will not honor its financial commitment. Our borrowing capacity under the credit facility has in essence been permanently reduced to $1.425 billion.
The Company also has developed assets with joint venture partners which were financed by financial institutions that have experienced varying degrees of distress in the past and could experience similar distress as economic conditions change. If one or more of these lenders fail to fund when contractually required, the Company or its joint venture partner may be unable to complete construction of its development properties.
A Significant Downgrade in Our Credit Ratings Could Adversely Affect Our Performance
A significant downgrade in our credit ratings, while not affecting our ability to draw proceeds under the revolving credit facility, would cause our borrowing costs to increase under the facility and impact our ability to borrow secured and unsecured debt, or otherwise limit our access to capital. In addition, a downgrade below investment grade would require us to post cash collateral and/or letters of credit in favor of some of our secured lenders to cover our self-insured property and liability insurance deductibles or to obtain lower deductible insurance compliant with the lenders’ requirements at the lower rating level.
Scheduled Debt Payments Could Adversely Affect Our Financial Condition
In the future, our cash flow could be insufficient to meet required payments of principal and interest or to pay distributions on our securities at expected levels.
We may not be able to refinance existing debt, including joint venture indebtedness (which in virtually all cases requires substantial principal payments at maturity) and, if we can, the terms of such refinancing might not be as favorable as the terms of existing indebtedness. If principal payments due at maturity cannot be refinanced, extended or paid with proceeds of other capital transactions, such as new equity capital, our operating cash flow will not be sufficient in all years to repay all maturing debt. As a result, certain of our other debt may cross default, we may be forced to postpone capital expenditures necessary for the maintenance of our properties, we may have to dispose of one or more properties on terms that would otherwise be unacceptable to us or we may be forced to allow the mortgage holder to foreclose on a property. Foreclosure on mortgaged properties or an inability to refinance existing indebtedness would likely have a negative impact on our financial condition and results of operations.
Please refer to Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, for the Company’s debt maturity schedule as of December 31, 2010.
Financial Covenants Could Adversely Affect the Company’s Financial Condition
The mortgages on our properties may contain customary negative covenants that, among other things, limit our ability, without the prior consent of the lender, to further mortgage the property and to reduce or change insurance coverage. In addition, our unsecured credit facilities contain certain restrictions, requirements and other limitations on our ability to incur debt. The indentures under which a substantial portion of our unsecured debt was issued also contain certain financial and operating covenants including, among other things, maintenance of certain financial ratios, as well as limitations on our ability to incur secured and unsecured debt (including acquisition financing), and to sell all or substantially all of our assets. Our credit facilities and indentures are cross-defaulted and also contain cross default provisions with other material debt. While the Company believes it was in compliance with its unsecured public debt covenants for both the years ended December 31, 2010 and 2009, should it fall out of compliance, it would likely have a negative impact on our financial condition and results of operations.
Some of the properties were financed with tax-exempt bonds that contain certain restrictive covenants or deed restrictions. We have retained an independent outside consultant to monitor compliance with the restrictive covenants and deed restrictions that affect these properties. If these bond compliance requirements restrict our ability to increase our rental rates to low or moderate-income residents, or eligible/qualified residents, then our income from these properties may be limited. While we generally believe that the interest rate benefit attendant to properties with tax-exempt bonds more than outweighs any loss of income due to restrictive covenants or deed restrictions, this may not always be the case.
Our Degree of Leverage Could Limit Our Ability to Obtain Additional Financing
Our degree of leverage could have important consequences to security holders. For example, the degree of leverage could affect our ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions, development or other general corporate purposes, making us more vulnerable to a downturn in business or the economy in general. Our consolidated debt-to-total market capitalization ratio was 38.4% as of December 31, 2010. In addition, our most restrictive unsecured public debt covenants are as follows:
Rising Interest Rates Could Adversely Affect Cash Flow
Advances under our credit facilities bear interest at variable rates based upon LIBOR at various interest periods, plus a spread dependent upon the Operating Partnership’s credit rating, or based upon bids received from the lending group. Certain public issuances of our senior unsecured debt instruments may also, from time to time, bear interest at floating rates. We may also borrow additional money with variable interest rates in the future. Increases in interest rates would increase our interest expense under these debt instruments and would increase the costs of refinancing existing debt and of issuing new debt. Accordingly, higher interest rates could adversely affect cash flow and our ability to service our debt and make distributions to security holders.
Derivatives and Hedging Activity Could Adversely Affect Cash Flow
In the normal course of business, we use derivatives to manage our exposure to interest rate volatility on debt instruments, including hedging for future debt issuances. At other times we may utilize derivatives to increase our exposure to floating interest rates. There can be no assurance that these hedging arrangements will have the desired beneficial impact. These arrangements, which can include a number of counterparties, may expose us to additional risks, including failure of any of our counterparties to
perform under these contracts, and may involve extensive costs, such as transaction fees or breakage costs, if we terminate them. No strategy can completely insulate us from the risks associated with interest rate fluctuations.
We Depend on Our Key Personnel
We depend on the efforts of the Chairman of our Board of Trustees, Samuel Zell, and our executive officers, particularly David J. Neithercut, our President and Chief Executive Officer (“CEO”). If they resign or otherwise cease to be employed by us, our operations could be temporarily adversely affected. Mr. Zell has entered into retirement benefit and noncompetition agreements with the Company.
Control and Influence by Significant Shareholders Could Be Exercised in a Manner Adverse to Other Shareholders
The consent of certain affiliates of Mr. Zell is required for certain amendments to the Sixth Amended and Restated Agreement of Limited Partnership of the Operating Partnership (the “Partnership Agreement”). As a result of their security ownership and rights concerning amendments to the Partnership Agreement, the security holders referred to herein may have influence over the Company. Although to the Company’s knowledge these security holders have not agreed to act together on any matter, they would be in a position to exercise even more influence over the Company’s affairs if they were to act together in the future. This influence could conceivably be exercised in a manner that is inconsistent with the interests of other security holders. For additional information regarding the security ownership of our trustees, including Mr. Zell, and our executive officers, see the Company’s definitive proxy statement.
Shareholders’ Ability to Effect Changes in Control of the Company is Limited
Provisions of Our Declaration of Trust and Bylaws Could Inhibit Changes in Control
Certain provisions of our Declaration of Trust and Bylaws may delay or prevent a change in control of the Company or other transactions that could provide the security holders with a premium over the then-prevailing market price of their securities or which might otherwise be in the best interest of our security holders. This includes the 5% Ownership Limit described below. While our existing preferred shares do not have these provisions, any future series of preferred shares may have certain voting provisions that could delay or prevent a change in control or other transactions that might otherwise be in the interest of our security holders. Our Bylaws require certain information to be provided by any security holder, or persons acting in concert with such security holder, who proposes business or a nominee at an annual meeting of shareholders, including disclosure of information related to hedging activities and investment strategies with respect to our securities. These requirements could delay or prevent a change in control or other transactions that might otherwise be in the interest of our security holders.
We Have a Share Ownership Limit for REIT Tax Purposes
To remain qualified as a REIT for federal income tax purposes, not more than 50% in value of our outstanding Shares may be owned, directly or indirectly, by five or fewer individuals at any time during the last half of any year. To facilitate maintenance of our REIT qualification, our Declaration of Trust, subject to certain exceptions, prohibits ownership by any single shareholder of more than 5% of the lesser of the number or value of the outstanding class of common or preferred shares. We refer to this restriction as the “Ownership Limit.” Absent any exemption or waiver granted by our Board of Trustees, securities acquired or held in violation of the Ownership Limit will be transferred to a trust for the exclusive benefit of a designated charitable beneficiary, and the security holder’s rights to distributions and to vote would terminate. A transfer of Shares may be void if it causes a person to violate the Ownership Limit. The Ownership Limit could delay or prevent a change in control and, therefore, could adversely affect our security holders’ ability to realize a premium over the then-prevailing market price for their Shares. To reduce the ability of the Board to use the Ownership Limit as an anti-takeover device, the Company’s Ownership Limit requires, rather than permits, the Board to grant a waiver of the Ownership Limit if the individual seeking a waiver demonstrates that such ownership would not jeopardize the Company’s status as a REIT.
Our Preferred Shares May Affect Changes in Control
Our Declaration of Trust authorizes the Board of Trustees to issue up to 100 million preferred shares, and to establish the preferences and rights (including the right to vote and the right to convert into common shares) of any preferred shares issued. The Board of Trustees may use its powers to issue preferred shares and to set the terms of such securities to delay or prevent a change in control of the Company, even if a change in control were in the interest of security holders.
Inapplicability of Maryland Law Limiting Certain Changes in Control
Certain provisions of Maryland law applicable to real estate investment trusts prohibit “business combinations” (including certain issuances of equity securities) with any person who beneficially owns ten percent or more of the voting power of outstanding securities, or with an affiliate who, at any time within the two-year period prior to the date in question, was the beneficial owner of ten percent or more of the voting power of the Company’s outstanding voting securities (an “Interested Shareholder”), or with an affiliate of an Interested Shareholder. These prohibitions last for five years after the most recent date on which the Interested Shareholder became an Interested Shareholder. After the five-year period, a business combination with an Interested Shareholder must be approved by two super-majority shareholder votes unless, among other conditions, holders of common shares receive a minimum price for their shares and the consideration is received in cash or in the same form as previously paid by the Interested Shareholder for its common shares. As permitted by Maryland law, however, the Board of Trustees of the Company has opted out of these restrictions with respect to any business combination involving Mr. Zell and certain of his affiliates and persons acting in concert with them. Consequently, the five-year prohibition and the super-majority vote requirements will not apply to a business combination involving us and/or any of them. Such business combinations may not be in the best interest of our security holders.
Our Success as a REIT Is Dependent on Compliance with Federal Income Tax Requirements
Our Failure to Qualify as a REIT Would Have Serious Adverse Consequences to Our Security Holders
We believe that we have qualified for taxation as a REIT for federal income tax purposes since our taxable year ended December 31, 1992 based, in part, upon opinions of tax counsel received whenever we have issued equity securities or engaged in significant merger transactions. We plan to continue to meet the requirements for taxation as a REIT. Many of these requirements, however, are highly technical and complex. We cannot, therefore, guarantee that we have qualified or will qualify in the future as a REIT. The determination that we are a REIT requires an analysis of various factual matters that may not be totally within our control. For example, to qualify as a REIT, our gross income must generally come from rental and other real estate or passive related sources that are itemized in the REIT tax laws. We are also required to distribute to security holders at least 90% of our REIT taxable income excluding capital gains. The fact that we hold our assets through ERP Operating Limited Partnership and its subsidiaries further complicates the application of the REIT requirements. Even a technical or inadvertent mistake could jeopardize our REIT status. Furthermore, Congress and the IRS might make changes to the tax laws and regulations, and the courts might issue new rulings that make it more difficult, or impossible, for us to remain qualified as a REIT. We do not believe, however, that any pending or proposed tax law changes would jeopardize our REIT status. In addition, Congress and the IRS have recently liberalized the REIT qualification rules to permit REITs in certain circumstances to pay a monetary penalty for inadvertent mistakes rather than lose REIT status.
If we fail to qualify as a REIT, we would be subject to federal income tax at regular corporate rates. Also, unless the IRS granted us relief under certain statutory provisions, we would remain disqualified from taxation as a REIT for four years following the year in which we failed to qualify as a REIT. If we fail to qualify as a REIT, we would have to pay significant income taxes. We, therefore, would have less money available for investments or for distributions to security holders. This would likely have a significant adverse effect on the value of our securities. In addition, we would no longer be required to make any distributions to security holders. Even if we qualify as a REIT, we are and will continue to be subject to certain federal, state and local taxes on our income and property. In addition, our corporate housing business, which is conducted through taxable REIT subsidiaries, generally will be subject to federal and state income tax at regular corporate rates to the extent they have taxable income.
We Could Be Disqualified as a REIT or Have to Pay Taxes if Our Merger Partners Did Not Qualify as REITs
If any of our prior merger partners had failed to qualify as a REIT throughout the duration of their existence, then they might have had undistributed “C corporation earnings and profits” at the time of their merger with us. If that was the case and we did not distribute those earnings and profits prior to the end of the year in which the merger took place, we might not qualify as a REIT. We believe based, in part, upon opinions of legal counsel received pursuant to the terms of our merger agreements as well as our own investigations, among other things, that each of our prior merger partners qualified as a REIT and that, in any event, none of them had any undistributed “C corporation earnings and profits” at the time of their merger with us. If any of our prior merger partners failed to qualify as a REIT, an additional concern would be that they could have been required to recognize taxable gain at the time they merged with us. We would be liable for the tax on such gain. We also could have to pay corporate income tax on any gain existing at the time of the applicable merger on assets acquired in the merger if the assets are sold within ten years of the merger.
Compliance with REIT Distribution Requirements May Affect Our Financial Condition
Distribution Requirements May Increase the Indebtedness of the Company
We may be required from time to time, under certain circumstances, to accrue as income for tax purposes interest and rent earned but not yet received. In such event, or upon our repayment of principal on debt, we could have taxable income without sufficient cash to enable us to meet the distribution requirements of a REIT. Accordingly, we could be required to borrow funds or liquidate investments on adverse terms in order to meet these distribution requirements.
Tax Elections Regarding Distributions May Impact Future Liquidity of the Company
During 2008 and 2009, we did make, and under certain circumstances may consider making again in the future, a tax election to treat future distributions to shareholders as distributions in the current year. This election, which is provided for in the REIT tax code, may allow us to avoid increasing our dividends or paying additional income taxes in the current year. However, this could result in a constraint on our ability to decrease our dividends in future years without creating risk of either violating the REIT distribution requirements or generating additional income tax liability.
Federal Income Tax Considerations
General
The following discussion summarizes the federal income tax considerations material to a holder of common shares. It is not exhaustive of all possible tax considerations. For example, it does not give a detailed discussion of any state, local or foreign tax considerations. The following discussion also does not address all tax matters that may be relevant to prospective shareholders in light of their particular circumstances. Moreover, it does not address all tax matters that may be relevant to shareholders who are subject to special treatment under the tax laws, such as insurance companies, tax-exempt entities, financial institutions or broker-dealers, foreign corporations, persons who are not citizens or residents of the United States and persons who own shares through a partnership or other entity treated as a flow-through entity for federal income tax purposes.
The specific tax attributes of a particular shareholder could have a material impact on the tax considerations associated with the purchase, ownership and disposition of common shares. Therefore, it is essential that each prospective shareholder consult with his or her own tax advisors with regard to the application of the federal income tax laws to the shareholder’s personal tax situation, as well as any tax consequences arising under the laws of any state, local or foreign taxing jurisdiction.
The information in this section is based on the current Internal Revenue Code, current, temporary and proposed Treasury regulations, the legislative history of the Internal Revenue Code, current administrative interpretations and practices of the Internal Revenue Service, including its practices and policies as set forth in private letter rulings, which are not binding on the Internal Revenue Service, and existing court decisions. Future legislation, regulations, administrative interpretations and court decisions could change current law or adversely affect existing interpretations of current law. Any change could apply retroactively. Thus, it is possible that the Internal Revenue Service could challenge the statements in this discussion, which do not bind the Internal Revenue Service or the courts, and that a court could agree with the Internal Revenue Service.
Our Taxation
We elected REIT status beginning with the year that ended December 31, 1992. In any year in which we qualify as a REIT, we generally will not be subject to federal income tax on the portion of our REIT taxable income or capital gain that we distribute to our shareholders. This treatment substantially eliminates the double taxation that applies to most corporations, which pay a tax on their income and then distribute dividends to shareholders who are in turn taxed on the amount they receive. We elected taxable REIT subsidiary status for certain of our corporate subsidiaries, primarily those engaged in condominium conversion and sale activities. As a result, we will be subject to federal income taxes for activities performed by our taxable REIT subsidiaries.
We will be subject to federal income tax at regular corporate rates upon our REIT taxable income or capital gains that we do not distribute to our shareholders. In addition, we will be subject to a 4% excise tax if we do not satisfy specific REIT distribution requirements. We could also be subject to the “alternative minimum tax” on our items of tax preference. In addition, any net income from “prohibited transactions” (i.e., dispositions of property, other than property held by a taxable REIT subsidiary, held primarily for sale to customers in the ordinary course of business) will be subject to a 100% tax. We could also be
subject to a 100% penalty tax on certain payments received from or on certain expenses deducted by a taxable REIT subsidiary if any such transaction is not respected by the Internal Revenue Service. If we fail to satisfy the 75% gross income test or the 95% gross income test (described below) but have maintained our qualification as a REIT because we satisfied certain other requirements, we will still generally be subject to a 100% penalty tax on the taxable income attributable to the gross income that caused the income test failure. If we fail to satisfy any of the REIT asset tests (described below) by more than a de minimis amount, due to reasonable cause, and we nonetheless maintain our REIT qualification because of specified cure provisions, we will be required to pay a tax equal to the greater of $50,000 or the highest marginal corporate tax rate multiplied by the net income generated by the non-qualifying assets. If we fail to satisfy any provision of the Internal Revenue Code that would result in our failure to qualify as a REIT (other than a violation of the REIT gross income or asset tests described below) and the violation is due to reasonable cause, we may retain our REIT qualification but we will be required to pay a penalty of $50,000 for each such failure. Moreover, we may be subject to taxes in certain situations and on certain transactions that we do not presently contemplate.
We believe that we have qualified as a REIT for all of our taxable years beginning with 1992. We also believe that our current structure and method of operation is such that we will continue to qualify as a REIT. However, given the complexity of the REIT qualification requirements, we cannot provide any assurance that the actual results of our operations have satisfied or will satisfy the requirements under the Internal Revenue Code for a particular year.
If we fail to qualify for taxation as a REIT in any taxable year and the relief provisions described herein do not apply, we will be subject to tax on our taxable income at regular corporate rates. We also may be subject to the corporate “alternative minimum tax.” As a result, our failure to qualify as a REIT would significantly reduce the cash we have available to distribute to our shareholders. Unless entitled to statutory relief, we would not be able to re-elect to be taxed as a REIT until our fifth taxable year after the year of disqualification. It is not possible to state whether we would be entitled to statutory relief.
Our qualification and taxation as a REIT depend on our ability to satisfy various requirements under the Internal Revenue Code. We are required to satisfy these requirements on a continuing basis through actual annual operating and other results. Accordingly, there can be no assurance that we will be able to continue to operate in a manner so as to remain qualified as a REIT.
Ownership of Taxable REIT Subsidiaries by Us. The Internal Revenue Code provides that REITs may own greater than ten percent of the voting power and value of the securities of a “taxable REIT subsidiary” or “TRS”, provided that the aggregate value of all of the TRS securities held by the REIT does not exceed 25% of the REIT’s total asset value. TRSs are corporations subject to tax as a regular “C” corporation that have elected, jointly with a REIT, to be a TRS. Generally, a taxable REIT subsidiary may own assets that cannot otherwise be owned by a REIT and can perform impermissible tenant services (discussed below), which would otherwise taint our rental income under the REIT income tests. However, the REIT will be obligated to pay a 100% penalty tax on some payments that we receive or on certain expenses deducted by our TRSs if the economic arrangements between us, our tenants and the TRS are not comparable to similar arrangements among unrelated parties. A TRS may also receive income from prohibited transactions without incurring the 100% federal income tax liability imposed on REITs. Income from prohibited transactions may include the purchase and sale of land, the purchase and sale of completed development properties and the sale of condominium units.
TRSs pay federal and state income tax at the full applicable corporate rates. The amount of taxes paid on impermissible tenant services income and the sale of real estate held primarily for sale to customers in the ordinary course of business may be material in amount. The TRSs will attempt to reduce, if possible, the amount of these taxes, but we cannot guarantee whether, or the extent to which, measures taken to reduce these taxes will be successful. To the extent that these companies are required to pay taxes, less cash may be available for distributions to shareholders.
Share Ownership Test and Organizational Requirement. In order to qualify as a REIT, our shares of beneficial interest must be held by a minimum of 100 persons for at least 335 days of a taxable year that is 12 months, or during a proportionate part of a taxable year of less than 12 months. Also, not more than 50% in value of our shares of beneficial interest may be owned directly or indirectly by applying certain constructive ownership rules, by five or fewer individuals during the last half of each taxable year. In addition, we must meet certain other organizational requirements, including, but not limited to, that (i) the beneficial ownership in us is evidenced by transferable shares and (ii) we are managed by one or more trustees. We believe that we have satisfied all of these tests and all other organizational requirements and that we will continue to do so in the future. In order to ensure compliance with the 100 person test and the 50% share ownership test discussed above, we have placed certain restrictions on the transfer of our shares that are intended to prevent further concentration of share ownership. However, such restrictions may not prevent us from failing these requirements, and thereby failing to qualify as a REIT.
Gross Income Tests. To qualify as a REIT, we must satisfy two gross income tests:
(1)
At least 75% of our gross income for each taxable year must be derived directly or indirectly from rents from real property, investments in real estate and/or real estate mortgages, dividends paid by another REIT and from some types of temporary investments (excluding certain hedging income).
(2)
At least 95% of our gross income for each taxable year must be derived from any combination of income qualifying under the 75% test and dividends, non-real estate mortgage interest and gain from the sale or disposition of stock or securities (excluding certain hedging income).
To qualify as rents from real property for the purpose of satisfying the gross income tests, rental payments must generally be received from unrelated persons and not be based on the net income of the resident. Also, the rent attributable to personal property must not exceed 15% of the total rent. We may generally provide services to residents without “tainting” our rental income only if such services are “usually or customarily rendered” in connection with the rental of real property and not otherwise considered “impermissible services”. If such services are impermissible, then we may generally provide them only if they are considered de minimis in amount, or are provided through an independent contractor from whom we derive no revenue and that meets other requirements, or through a taxable REIT subsidiary. We believe that services provided to residents by us either are usually or customarily rendered in connection with the rental of real property and not otherwise considered impermissible, or, if considered impermissible services, will meet the de minimis test or will be provided by an independent contractor or taxable REIT subsidiary. However, we cannot provide any assurance that the Internal Revenue Service will agree with these positions.
If we fail to satisfy one or both of the gross income tests for any taxable year, we may nevertheless qualify as a REIT for the year if we are entitled to relief under certain provisions of the Internal Revenue Code. In this case, a penalty tax would still be applicable as discussed above. Generally, it is not possible to state whether in all circumstances we would be entitled to the benefit of these relief provisions and in the event these relief provisions do not apply, we will not qualify as a REIT.
Asset Tests. In general, at the close of each quarter of our taxable year, we must satisfy four tests relating to the nature of our assets:
(1)
At least 75% of the value of our total assets must be represented by real estate assets (which include for this purpose shares in other real estate investment trusts) and certain cash related items;
(2)
Not more than 25% of the value of our total assets may be represented by securities other than those in the 75% asset class;
(3)
Except for securities included in item 1 above, equity investments in other REITs, qualified REIT subsidiaries (i.e., corporations owned 100% by a REIT that are not TRSs or REITs), or taxable REIT subsidiaries: (a) the value of any one issuer’s securities owned by us may not exceed 5% of the value of our total assets and (b) we may not own securities representing more than 10% of the voting power or value of the outstanding securities of any one issuer; and
(4)
Not more than 25% of the value of our total assets may be represented by securities of one or more taxable REIT subsidiaries.
The 10% value test described in clause (3) (b) above does not apply to certain securities that fall within a safe harbor under the Code. Under the safe harbor, the following are not considered “securities” held by us for purposes of this 10% value test: (i) straight debt securities, (ii) any loan of an individual or an estate, (iii) certain rental agreements for the use of tangible property, (iv) any obligation to pay rents from real property, (v) any security issued by a state or any political subdivision thereof, foreign government or Puerto Rico only if the determination of any payment under such security is not based on the profits of another entity or payments on any obligation issued by such other entity, or (vi) any security issued by a REIT. The timing and payment of interest or principal on a security qualifying as straight debt may be subject to a contingency provided that (A) such contingency does not change the effective yield to maturity, not considering a de minimis change which does not exceed the greater of 1/4 of 1% or 5% of the annual yield to maturity or we own $1,000,000 or less of the aggregate issue price or value of the particular issuer’s debt and not more than 12 months of unaccrued interest can be required to be prepaid or (B) the contingency is consistent with commercial practice and the contingency is effective upon a default or the exercise of a prepayment right by the issuer of the debt. If we hold indebtedness from any issuer, including a REIT, the indebtedness will be subject to, and may cause a violation of, the asset tests, unless it is a qualifying real estate asset or otherwise satisfies the above safe harbor. We currently own equity interests in certain entities that have elected to be taxed as REITs for federal income tax purposes and are not publicly traded. If any such entity were to fail to qualify as a REIT, we would not meet the 10% voting stock limitation and the 10% value limitation and we would, unless certain relief provisions applied, fail to qualify as a REIT. We believe that we and each of the
REITs we own an interest in have and will comply with the foregoing asset tests for REIT qualification. However, we cannot provide any assurance that the Internal Revenue Service will agree with our determinations.
If we fail to satisfy the 5% or 10% asset tests described above after a 30-day cure period provided in the Internal Revenue Code, we will be deemed to have met such tests if the value of our non-qualifying assets is de minimis (i.e., does not exceed the lesser of 1% of the total value of our assets at the end of the applicable quarter or $10,000,000) and we dispose of the non-qualifying assets within six months after the last day of the quarter in which the failure to satisfy the asset tests is discovered. For violations due to reasonable cause and not willful neglect that are in excess of the de minimis exception described above, we may avoid disqualification as a REIT under any of the asset tests, after the 30-day cure period, by disposing of sufficient assets to meet the asset test within such six month period, paying a tax equal to the greater of $50,000 or the highest corporate tax rate multiplied by the net income generated by the non-qualifying assets and disclosing certain information to the Internal Revenue Service. If we cannot avail ourselves of these relief provisions, or if we fail to timely cure any noncompliance with the asset tests, we would cease to qualify as a REIT.
Annual Distribution Requirements. To qualify as a REIT, we are generally required to distribute dividends, other than capital gain dividends, to our shareholders each year in an amount at least equal to 90% of our REIT taxable income. These distributions must be paid either in the taxable year to which they relate, or in the following taxable year if declared before we timely file our tax return for the prior year and if paid with or before the first regular dividend payment date after the declaration is made. We intend to make timely distributions sufficient to satisfy our annual distribution requirements. To the extent that we do not distribute all of our net capital gain or distribute at least 90%, but less than 100% of our REIT taxable income, as adjusted, we are subject to tax on these amounts at regular corporate rates. We will be subject to a 4% excise tax on the excess of the required distribution over the sum of amounts actually distributed and amounts retained for which federal income tax was paid, if we fail to distribute during each calendar year at least the sum of: (1) 85% of our REIT ordinary income for the year; (2) 95% of our REIT capital gain net income for the year; and (3) any undistributed taxable income from prior taxable years. A REIT may elect to retain rather than distribute all or a portion of its net capital gains and pay the tax on the gains. In that case, a REIT may elect to have its shareholders include their proportionate share of the undistributed net capital gains in income as long-term capital gains and receive a credit for their share of the tax paid by the REIT. For purposes of the 4% excise tax described above, any retained amounts would be treated as having been distributed.
Ownership of Partnership Interests By Us. As a result of our ownership of the Operating Partnership, we will be considered to own and derive our proportionate share of the assets and items of income of the Operating Partnership, respectively, for purposes of the REIT asset and income tests, including its share of assets and items of income of any subsidiaries that are partnerships or limited liability companies.
State and Local Taxes. We may be subject to state or local taxation in various jurisdictions, including those in which we transact business or reside. Generally REITs have seen increases in state and local taxes in recent years. Our state and local tax treatment may not conform to the federal income tax treatment discussed above. Consequently, prospective shareholders should consult their own tax advisors regarding the effect of state and local tax laws on an investment in common shares.
Taxation of Domestic Shareholders Subject to U.S. Tax
General. If we qualify as a REIT, distributions made to our taxable domestic shareholders with respect to their common shares, other than capital gain distributions and distributions attributable to taxable REIT subsidiaries, will be treated as ordinary income to the extent that the distributions come out of earnings and profits. These distributions will not be eligible for the dividends received deduction for shareholders that are corporations nor will they constitute “qualified dividend income” under the Internal Revenue Code, meaning that such dividends will be taxed at marginal rates applicable to ordinary income rather than the special capital gain rates currently applicable to qualified dividend income distributed to shareholders who satisfy applicable holding period requirements. In determining whether distributions are out of earnings and profits, we will allocate our earnings and profits first to preferred shares and second to the common shares. The portion of ordinary dividends which represent ordinary dividends we receive from a TRS, will be designated as “qualified dividend income” to REIT shareholders. For tax years ending on or before December 31, 2012, these qualified dividends are eligible for preferential tax rates if paid to our non-corporate shareholders.
To the extent we make distributions to our taxable domestic shareholders in excess of our earnings and profits, such distributions will be considered a return of capital. Such distributions will be treated as a tax-free distribution and will reduce the tax basis of a shareholder’s common shares by the amount of the distribution so treated. To the extent such distributions
cumulatively exceed a taxable domestic shareholder’s tax basis, such distributions are taxable as gain from the sale of shares. Shareholders may not include in their individual income tax returns any of our net operating losses or capital losses.
Dividends declared by a REIT in October, November, or December are deemed to have been paid by the REIT and received by its shareholders on December 31 of that year, so long as the dividends are actually paid during January of the following year. However, this treatment only applies to the extent of the REIT’s earnings and profits existing on December 31. To the extent the shareholder distribution paid in January exceeds available earnings and profits as of December 31, the excess will be treated as a distribution taxable to shareholders in the year paid. As such, for tax reporting purposes, January distributions paid to our shareholders may be split between two tax years.
Distributions made by us that we properly designate as capital gain dividends will be taxable to taxable domestic shareholders as gain from the sale or exchange of a capital asset held for more than one year. This treatment applies only to the extent that the designated distributions do not exceed our actual net capital gain for the taxable year. It applies regardless of the period for which a domestic shareholder has held his or her common shares. Despite this general rule, corporate shareholders may be required to treat up to 20% of certain capital gain dividends as ordinary income.
Generally, we will classify a portion of our designated capital gain dividends as a 15% rate gain distribution and the remaining portion as an unrecaptured Section 1250 gain distribution. A 15% rate gain distribution would be taxable to taxable domestic shareholders that are individuals, estates or trusts at a maximum rate of 15% (which 15% rate is currently scheduled to increase to 20% for taxable years beginning on and after January 1, 2013). An unrecaptured Section 1250 gain distribution would be taxable to taxable domestic shareholders that are individuals, estates or trusts at a maximum rate of 25%.
If, for any taxable year, we elect to designate as capital gain dividends any portion of the dividends paid or made available for the year to holders of all classes of shares of beneficial interest, then the portion of the capital gains dividends that will be allocable to the holders of common shares will be the total capital gain dividends multiplied by a fraction. The numerator of the fraction will be the total dividends paid or made available to the holders of the common shares for the year. The denominator of the fraction will be the total dividends paid or made available to holders of all classes of shares of beneficial interest.
We may elect to retain (rather than distribute as is generally required) net capital gain for a taxable year and pay the income tax on that gain. If we make this election, shareholders must include in income, as long-term capital gain, their proportionate share of the undistributed net capital gain. Shareholders will be treated as having paid their proportionate share of the tax paid by us on these gains. Accordingly, they will receive a tax credit or refund for the amount. Shareholders will increase the basis in their common shares by the difference between the amount of capital gain included in their income and the amount of the tax they are treated as having paid. Our earnings and profits will be adjusted appropriately.
In general, a shareholder will recognize gain or loss for federal income tax purposes on the sale or other disposition of common shares in an amount equal to the difference between:
(a)
the amount of cash and the fair market value of any property received in the sale or other disposition; and
(b)
the shareholder’s adjusted tax basis in the common shares.
The gain or loss will be capital gain or loss if the common shares were held as a capital asset. Generally, the capital gain or loss will be long-term capital gain or loss if the common shares were held for more than one year.
In general, a loss recognized by a shareholder upon the sale of common shares that were held for six months or less, determined after applying certain holding period rules, will be treated as long-term capital loss to the extent that the shareholder received distributions that were treated as long-term capital gains. For shareholders who are individuals, trusts and estates, the long-term capital loss will be apportioned among the applicable long-term capital gain rates to the extent that distributions received by the shareholder were previously so treated.
Taxation of Domestic Tax-Exempt Shareholders
Most tax-exempt organizations are not subject to federal income tax except to the extent of their unrelated business taxable income, which is often referred to as UBTI. Unless a tax-exempt shareholder holds its common shares as debt financed property or uses the common shares in an unrelated trade or business, distributions to the shareholder should not constitute UBTI. Similarly, if a tax-exempt shareholder sells common shares, the income from the sale should not constitute UBTI unless the shareholder held the shares as debt financed property or used the shares in a trade or business.
However, for tax-exempt shareholders that are social clubs, voluntary employee benefit associations, supplemental unemployment benefit trusts, and qualified group legal services plans, income from owning or selling common shares will constitute UBTI unless the organization is able to properly deduct amounts set aside or placed in reserve so as to offset the income generated by its investment in common shares. These shareholders should consult their own tax advisors concerning these set aside and reserve requirements which are set forth in the Internal Revenue Code.
In addition, certain pension trusts that own more than 10% of a “pension-held REIT” must report a portion of the distributions that they receive from the REIT as UBTI. We have not been and do not expect to be treated as a pension-held REIT for purposes of this rule.
Taxation of Foreign Shareholders
The following is a discussion of certain anticipated United States federal income tax consequences of the ownership and disposition of common shares applicable to a foreign shareholder. For purposes of this discussion, a “foreign shareholder” is any person other than:
(a)
a citizen or resident of the United States;
(b)
a corporation or partnership created or organized in the United States or under the laws of the United States or of any state thereof; or
(c)
an estate or trust whose income is includable in gross income for United States federal income tax purposes regardless of its source.
Distributions by Us. Distributions by us to a foreign shareholder that are neither attributable to gain from sales or exchanges by us of United States real property interests nor designated by us as capital gains dividends will be treated as dividends of ordinary income to the extent that they are made out of our earnings and profits. These distributions ordinarily will be subject to withholding of United States federal income tax on a gross basis at a 30% rate, or a lower treaty rate, unless the dividends are treated as effectively connected with the conduct by the foreign shareholder of a United States trade or business. Please note that under certain treaties lower withholding rates generally applicable to dividends do not apply to dividends from REITs. Dividends that are effectively connected with a United States trade or business will be subject to tax on a net basis at graduated rates, and are generally not subject to withholding. Certification and disclosure requirements must be satisfied before a dividend is exempt from withholding under this exemption. A foreign shareholder that is a corporation also may be subject to an additional branch profits tax at a 30% rate or a lower treaty rate.
We expect to withhold United States income tax at the rate of 30% on any such distributions made to a foreign shareholder unless:
(a)
a lower treaty rate applies and any required form or certification evidencing eligibility for that reduced rate is filed with us; or
(b)
the foreign shareholder files an IRS Form W-8ECI with us claiming that the distribution is effectively connected income.
If such distribution is in excess of our current or accumulated earnings and profits, it will not be taxable to a foreign shareholder to the extent that the distribution does not exceed the adjusted basis of the shareholder’s common shares. Instead, the distribution will reduce the adjusted basis of the common shares. To the extent that the distribution exceeds the adjusted basis of the common shares, it will give rise to gain from the sale or exchange of the shareholder’s common shares. The tax treatment of this gain is described below.
We intend to withhold at a rate of 30%, or a lower applicable treaty rate, on the entire amount of any distribution not designated as a capital gain distribution. In such event, a foreign shareholder may seek a refund of the withheld amount from the IRS if it is subsequently determined that the distribution was, in fact, in excess of our earnings and profits, and the amount withheld exceeded the foreign shareholder’s United States tax liability with respect to the distribution.
Any capital gain dividend with respect to any class of our stock which is “regularly traded” on an established securities market, will be treated as an ordinary dividend described above, if the foreign shareholder did not own more than 5% of such class of stock at any time during the one year period ending on the date of the distribution. Foreign shareholders generally will not be required to report such distributions received from us on U.S. federal income tax returns and all distributions treated as
dividends for U.S. federal income tax purposes, including any capital gain dividends, will be subject to a 30% U.S. withholding tax (unless reduced or eliminated under an applicable income tax treaty), as described above. In addition, the branch profits tax will no longer apply to such distributions.
Distributions to a foreign shareholder that we designate at the time of the distributions as capital gain dividends, other than those arising from the disposition of a United States real property interest, generally will not be subject to United States federal income taxation unless:
(a)
the investment in the common shares is effectively connected with the foreign shareholder’s United States trade or business, in which case the foreign shareholder will be subject to the same treatment as domestic shareholders, except that a shareholder that is a foreign corporation may also be subject to the branch profits tax, as discussed above; or
(b)
the foreign shareholder is a nonresident alien individual who is present in the United States for 183 days or more during the taxable year and has a “tax home” in the United States, in which case the nonresident alien individual will be subject to a 30% tax on the individual’s capital gains.
Under the Foreign Investment in Real Property Tax Act, which is known as FIRPTA, distributions to a foreign shareholder that are attributable to gain from sales or exchanges of United States real property interests will cause the foreign shareholder to be treated as recognizing the gain as income effectively connected with a United States trade or business. This rule applies whether or not a distribution is designated as a capital gain dividend. Accordingly, foreign shareholders generally would be taxed on these distributions at the same rates applicable to U.S. shareholders, subject to a special alternative minimum tax in the case of nonresident alien individuals. In addition, a foreign corporate shareholder might be subject to the branch profits tax discussed above, as well as U.S. federal income tax return filing requirements. We are required to withhold 35% of these distributions. The withheld amount can be credited against the foreign shareholder’s United States federal income tax liability.
Although the law is not entirely clear on the matter, it appears that amounts we designate as undistributed capital gains in respect of the common shares held by U.S. shareholders would be treated with respect to foreign shareholders in the same manner as actual distributions of capital gain dividends. Under that approach, foreign shareholders would be able to offset as a credit against their United States federal income tax liability their proportionate share of the tax paid by us on these undistributed capital gains. In addition, if timely requested, foreign shareholders might be able to receive from the IRS a refund to the extent their proportionate share of the tax paid by us were to exceed their actual United States federal income tax liability.
Foreign Shareholders’ Sales of Common Shares. Gain recognized by a foreign shareholder upon the sale or exchange of common shares generally will not be subject to United States taxation unless the shares constitute a “United States real property interest” within the meaning of FIRPTA. The common shares will not constitute a United States real property interest so long as we are a domestically controlled REIT. A domestically controlled REIT is a REIT in which at all times during a specified testing period less than 50% in value of its stock is held directly or indirectly by foreign shareholders. We believe that we are a domestically controlled REIT. Therefore, we believe that the sale of common shares will not be subject to taxation under FIRPTA. However, because common shares and preferred shares are publicly traded, we cannot guarantee that we will continue to be a domestically controlled REIT. In any event, gain from the sale or exchange of common shares not otherwise subject to FIRPTA will be subject to U.S. tax, if either:
(a)
the investment in the common shares is effectively connected with the foreign shareholder’s United States trade or business, in which case the foreign shareholder will be subject to the same treatment as domestic shareholders with respect to the gain; or
(b)
the foreign shareholder is a nonresident alien individual who is present in the United States for 183 days or more during the taxable year and has a tax home in the United States, in which case the nonresident alien individual will be subject to a 30% tax on the individual’s capital gains.
Even if we do not qualify as or cease to be a domestically controlled REIT, gain arising from the sale or exchange by a foreign shareholder of common shares still would not be subject to United States taxation under FIRPTA as a sale of a United States real property interest if:
(a)
the class or series of shares being sold is “regularly traded,” as defined by applicable IRS regulations, on an established securities market such as the New York Stock Exchange; and
(b)
the selling foreign shareholder owned 5% or less of the value of the outstanding class or series of shares being sold throughout the five-year period ending on the date of the sale or exchange.
If gain on the sale or exchange of common shares were subject to taxation under FIRPTA, the foreign shareholder would be subject to regular United States income tax with respect to the gain in the same manner as a taxable U.S. shareholder, subject to any applicable alternative minimum tax, a special alternative minimum tax in the case of nonresident alien individuals and the possible application of the branch profits tax in the case of foreign corporations. The purchaser of the common shares would be required to withhold and remit to the IRS 10% of the purchase price.
Information Reporting Requirement and Backup Withholding
We will report to our domestic shareholders and the Internal Revenue Service the amount of distributions paid during each calendar year and the amount of tax withheld, if any. Under certain circumstances, domestic shareholders may be subject to backup withholding. Backup withholding will apply only if such domestic shareholder fails to furnish certain information to us or the Internal Revenue Service. Backup withholding will not apply with respect to payments made to certain exempt recipients, such as corporations and tax-exempt organizations. Domestic shareholders should consult their own tax advisors regarding their qualification for exemption from backup withholding and the procedure for obtaining such an exemption. Backup withholding is not an additional tax. Rather, the amount of any backup withholding with respect to a payment to a domestic shareholder will be allowed as a credit against such person’s United States federal income tax liability and may entitle such person to a refund, provided that the required information is timely furnished to the Internal Revenue Service.
Medicare Tax on Unearned Income
Newly enacted legislation requires certain U.S. shareholders that are taxed as individuals, estates or trusts to pay an additional 3.8% tax on, among other things, dividends on and capital gains from the sale or other disposition of shares for taxable years beginning after December 31, 2012.
Withholding on Foreign Financial Institutions and Non-U.S. Shareholders
Newly enacted legislation may impose withholding taxes on certain types of payments made to “foreign financial institutions” and certain other non-U.S. shareholders. Under this legislation, the failure to comply with additional certification, information reporting and other specified requirements could result in withholding tax being imposed on payments of dividends and sales proceeds to U.S. shareholders that own their shares through foreign accounts or foreign intermediaries and certain non-U.S. shareholders. The legislation imposes a 30% withholding tax on dividends on, and gross proceeds from the sale or other disposition of, our shares paid to a foreign financial institution or to a foreign non-financial entity, unless (i) the foreign financial institution undertakes certain diligence and reporting obligations or (ii) the foreign non-financial entity either certifies it does not have any substantial U.S. owners or furnishes identifying information regarding each substantial U.S. owner. In addition, if the payee is a foreign financial institution, it generally must enter into an agreement with the U.S. Treasury that requires, among other things, that it undertake to identify accounts held by certain U.S. persons or U.S.-owned foreign entities, annually report certain information about such accounts and withhold 30% on payments to certain other account holders. The legislation applies to payments made after December 31, 2012.

ITEM 1B - UNRESOLVED STAFF COMMENTS
Item 1B.
Unresolved Staff Comments
None.

ITEM 2 - PROPERTIES
Item 2.
Properties
As of December 31, 2010, the Company, directly or indirectly through investments in title holding entities, owned all or a portion of 451 properties located in 17 states and the District of Columbia consisting of 129,604 apartment units. The Company’s properties are summarized by building type in the following table:
The Company’s properties are summarized by ownership type in the following table:
The following table sets forth certain information by market relating to the Company’s properties at December 31, 2010:
PORTFOLIO SUMMARY
(1)
Average rental rate is defined as total rental revenues divided by the weighted average occupied apartment units for the month of December 2010.
(2)
All Other Markets - Each individual market is less than 2.0% of stabilized NOI.
Note: Projects under development are not included in the Portfolio Summary until construction has been completed, at which time the projects are included at their stabilized NOI. Projects under lease-up are included at their stabilized NOI.
The Company’s properties had an average occupancy of approximately 94.1% (94.5% on a same store basis) at December 31, 2010. Certain of the Company’s properties are encumbered by mortgages and additional detail can be found on Schedule III - Real Estate and Accumulated Depreciation. Resident leases are generally for twelve months in length and can require security deposits. The garden-style properties are generally defined as properties with two and/or three story buildings while the mid-rise/high-rise are defined as properties with greater than three story buildings. These two property types typically provide residents with amenities, which may include a clubhouse, swimming pool, laundry facilities and cable television access. Certain of these properties offer additional amenities such as saunas, whirlpools, spas, sports courts and exercise rooms or other amenities. In addition, many of our urban properties have parking garage and/or retail components. The military housing properties are defined as those properties located on military bases.
The distribution of the properties throughout the United States reflects the Company’s belief that geographic diversification helps insulate the portfolio from regional and economic influences. At the same time, the Company has sought to create clusters of properties within each of its primary markets in order to achieve economies of scale in management and operation. The Company may nevertheless acquire additional multifamily properties located anywhere in the United States.
The properties currently in various stages of development and lease-up at December 31, 2010 are included in the following table:
Consolidated Development and Lease-Up Projects as of December 31, 2010
(Amounts in thousands except for project and apartment unit amounts)
(1)
Total capital cost represents estimated cost for projects under development and/or developed and all capitalized costs incurred to date plus any estimates of costs remaining to be funded for all projects, all in accordance with GAAP.
(2)
500 West 23rd
Street - The land under this development is subject to a long term ground lease.
(3)
Properties included here are substantially complete. However, they may still require additional exterior and interior work for all apartment units to be available for leasing.
(4)
Debt is tax-exempt bonds that are entirely outstanding, with $16.8 million held in escrow by the lender and released as draw requests are made. This escrowed amount is classified as “Deposits - restricted” in the consolidated balance sheets at December 31, 2010. The Company paid off the $28.2 million in taxable bonds during the fourth quarter of 2010.
(5)
The Company acquired these completed development projects prior to stabilization and has begun/continued lease-up activities.
(6)
Total book value not placed in service excludes $5.9 million of construction-in-progress related to the reconstruction of the Prospect Towers garage.

ITEM 3 - LEGAL PROCEEDINGS
Item 3.
Legal Proceedings
The Company is party to a housing discrimination lawsuit brought by a non-profit civil rights organization in April 2006 in the U.S. District Court for the District of Maryland. The suit alleges that the Company designed and built approximately 300 of its properties in violation of the accessibility requirements of the Fair Housing Act and Americans With Disabilities Act. The suit seeks actual and punitive damages, injunctive relief (including modification of non-compliant properties), costs and attorneys’ fees. The Company believes it has a number of viable defenses, including that a majority of the named properties were completed before the operative dates of the statutes in question and/or were not designed or built by the Company. Accordingly, the Company is defending the suit vigorously. Due to the pendency of the Company’s defenses and the uncertainty of many other critical factual and legal issues, it is not possible to determine or predict the outcome of the suit or a possible loss or a range of loss, and no amounts have been accrued at December 31, 2010. While no assurances can be given, the Company does not believe that the suit, if adversely determined, would have a material adverse effect on the Company.
The Company does not believe there is any other litigation pending or threatened against it that, individually or in the aggregate, may reasonably be expected to have a material adverse effect on the Company.

ITEM 4 - RESERVED
Item 4.
Reserved
PART II

ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Common Share Market Prices and Dividends
The following table sets forth, for the years indicated, the high, low and closing sales prices for and the distributions declared on the Company’s Common Shares, which trade on the New York Stock Exchange under the trading symbol EQR.
Sales Price
High
Low
Closing
Distributions
Fourth Quarter Ended December 31, 2010
$
52.64
$
47.01
$
51.95
$
0.4575
Third Quarter Ended September 30, 2010
$
50.80
$
39.69
$
47.57
$
0.3375
Second Quarter Ended June 30, 2010
$
48.46
$
38.84
$
41.64
$
0.3375
First Quarter Ended March 31, 2010
$
40.43
$
31.40
$
39.15
$
0.3375
Fourth Quarter Ended December 31, 2009
$
36.38
$
27.54
$
33.78
$
0.3375
Third Quarter Ended September 30, 2009
$
33.06
$
18.80
$
30.70
$
0.3375
Second Quarter Ended June 30, 2009
$
26.24
$
17.73
$
22.23
$
0.4825
First Quarter Ended March 31, 2009
$
29.87
$
15.68
$
18.35
$
0.4825
The number of record holders of Common Shares at February 16, 2011 was approximately 3,000. The number of outstanding Common Shares as of February 16, 2011 was 293,981,029.
Unregistered Common Shares Issued in the Quarter Ended December 31,
During the quarter ended December 31, 2010, the Company issued 262,151 Common Shares in exchange for 262,151 OP Units held by various limited partners of the Operating Partnership. OP Units are generally exchangeable into Common Shares of EQR on a one-for-one basis or, at the option of the Operating Partnership, the cash equivalent thereof, at any time one year after the date of issuance. These shares were either registered under the Securities Act of 1933, as amended (the “Securities Act”), or issued in reliance on an exemption from registration under Section 4(2) of the Securities Act and the rules and regulations promulgated thereunder, as these were transactions by an issuer not involving a public offering. In light of the manner of the sale and information obtained by the Company from the limited partners in connection with these transactions, the Company believes it may rely on these exemptions.
Equity Compensation Plan Information
The following table provides information as of December 31, 2010 with respect to the Company’s Common Shares that may be issued under its existing equity compensation plans.
(1)
The amounts shown in columns (a) and (b) of the above table do not include 911,950 outstanding Common Shares (all of which are restricted and subject to vesting requirements) that were granted under the Company’s Amended and Restated 1993 Share Option and Share Award Plan, as amended (the “1993 Plan”) and the Company’s 2002 Share Incentive Plan, as restated (the “2002 Plan”) and outstanding Common Shares that have been purchased by employees and trustees under the Company’s ESPP.
(2)
Includes 5,395,739 Common Shares that may be issued under the 2002 Plan, of which only 25% may be in the form of restricted shares, and 3,403,970 Common Shares that may be sold to employees and trustees under the ESPP.
The aggregate number of securities available for issuance (inclusive of restricted shares previously granted and outstanding and shares underlying outstanding options) under the 2002 Plan equals 7.5% of the Company’s outstanding Common Shares, calculated on a fully diluted basis, determined annually on the first day of each calendar year. On January 1, 2011, this amount equaled 22,785,696, of which 5,395,739 shares were available for future issuance. No awards may be granted under the 2002 Plan after February 20, 2012.

ITEM 6 - SELECTED FINANCIAL DATA
Item 6.
Selected Financial Data
The following table sets forth selected financial and operating information on a historical basis for the Company. The following information should be read in conjunction with all of the financial statements and notes thereto included elsewhere in this Form 10-K. The historical operating and balance sheet data have been derived from the historical financial statements of the Company. All amounts have also been restated in accordance with the guidance on discontinued operations. Certain capitalized terms as used herein are defined in the Notes to Consolidated Financial Statements.
CONSOLIDATED HISTORICAL FINANCIAL INFORMATION
(Financial information in thousands except for per share and property data)
(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 Company commences the conversion of apartment units to condominiums, it simultaneously discontinues depreciation of such property.
(2)
Normalized funds from operations (“Normalized FFO”) begins with FFO and excludes:
n
the impact of any expenses relating to asset impairment and valuation allowances;
n
property acquisition and other transaction costs related to mergers and acquisitions and pursuit cost write-offs (other expenses);
n
gains and losses from early debt extinguishment, including prepayment penalties, preferred share redemptions and the cost related to the implied option value of non-cash convertible debt discounts;
n
gains and losses on the sales of non-operating assets, including gains and losses from land parcel and condominium sales, net of the effect of income tax benefits or expenses; and
n
other miscellaneous non-comparable items.
(3)
The Company believes that FFO and FFO available to Common Shares and Units are helpful to investors as supplemental measures of the operating performance of a real estate company, because they are recognized measures 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 and FFO available to Common Shares and Units can help compare the operating performance of a company’s real estate between periods or as compared to different companies. The company also believes that Normalized FFO and Normalized FFO available to Common Shares and Units are helpful to investors as supplemental measures of the operating performance of a real estate company because they allow investors to compare the company’s operating performance to its performance in prior reporting periods and to the operating performance of other real estate companies without the effect of items that by their nature are not comparable from period to period and tend to obscure the Company’s actual operating results. FFO, FFO available to Common Shares and Units, Normalized FFO and Normalized FFO available to Common Shares and Units do not represent net income, net income available to Common Shares or net cash flows from operating activities in accordance with GAAP. Therefore, FFO, FFO available to Common Shares and Units, Normalized FFO and Normalized FFO available to Common Shares and Units should not be exclusively considered as alternatives to net income, net income available to Common Shares or net cash flows from operating activities as determined by GAAP or as a measure of liquidity. The Company’s calculation of FFO, FFO available to Common Shares and Units, Normalized FFO and Normalized FFO available to Common Shares and Units 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.
(4)
FFO available to Common Shares and Units and Normalized FFO available to Common Shares and Units are calculated on a basis consistent with net income available to Common Shares and reflects adjustments to net income for preferred distributions and premiums on redemption of preferred shares in accordance with accounting principles generally accepted in the United States. The equity positions of various individuals and entities that contributed their properties to the Operating Partnership in exchange for OP Units are collectively referred to as the “Noncontrolling Interests - Operating Partnership”. Subject to certain restrictions, the Noncontrolling Interests - Operating Partnership may exchange their OP Units for EQR Common Shares on a one-for-one basis.
Note: See

ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of the results of operations and financial condition of the Company should be read in connection with the Consolidated Financial Statements and Notes thereto. Due to the Company’s ability to control the Operating Partnership and its subsidiaries, the Operating Partnership and each such subsidiary entity has been consolidated with the Company for financial reporting purposes, except for an unconsolidated development land parcel and our military housing properties. Capitalized terms used herein and not defined are as defined elsewhere in this Annual Report on Form 10-K for the year ended December 31, 2010.
Forward-Looking Statements
Forward-looking statements in this Item 7 as well as elsewhere in this Annual Report on Form 10-K are intended to be made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on current expectations, estimates, projections and assumptions made by management. While the Company’s management believes the assumptions underlying its forward-looking statements are reasonable, such information is inherently subject to uncertainties and may involve certain risks, which could cause actual results, performance or achievements of the Company to
differ materially from anticipated future results, performance or achievements expressed or implied by such forward-looking statements. Many of these uncertainties and risks are difficult to predict and beyond management’s control. Forward-looking statements are not guarantees of future performance, results or events. The forward-looking statements contained herein are made as of the date hereof and the Company undertakes no obligation to update or supplement these forward-looking statements. Factors that might cause such differences include, but are not limited to the following:
n
We intend to actively acquire and/or develop multifamily properties for rental operations as market conditions dictate. We may also acquire multifamily properties that are unoccupied or in the early stages of lease up. We may be unable to lease up these apartment properties on schedule, resulting in decreases in expected rental revenues and/or lower yields due to lower occupancy and rates as well as higher than expected concessions. We may underestimate the costs necessary to bring an acquired property up to standards established for its intended market position or to complete a development 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 (or lack thereof) may increase (or depress) prices for multifamily properties. We may not be in a position or have the opportunity in the future to make suitable property acquisitions on favorable terms. The total number of development units, costs 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;
n
Debt financing and other capital required by the Company may not be available or may only be available on adverse terms;
n
Labor and materials required for maintenance, repair, capital expenditure or development may be more expensive than anticipated;
n
Occupancy levels and market rents may be adversely affected by national and local economic and market conditions including, without limitation, new construction and excess inventory of multifamily housing and single family housing, slow or negative employment growth, availability of low interest mortgages for single family home buyers and the potential for geopolitical instability, all of which are beyond the Company’s control; and
n
Additional factors as discussed in Part I of this Annual Report on Form 10-K, particularly those under “Item 1A. Risk Factors”.
Forward-looking statements and related uncertainties are also included in the Notes to Consolidated Financial Statements in this report.
Overview
Equity Residential (“EQR”), a Maryland real estate investment trust (“REIT”) formed in March 1993, is an S&P 500 company focused on the acquisition, development and management of high quality apartment properties in top United States growth markets. EQR has elected to be taxed as a REIT.
The Company is one of the largest publicly traded real estate companies and is the largest publicly traded owner of multifamily properties in the United States (based on the aggregate market value of its outstanding Common Shares, the number of apartment units wholly owned and total revenues earned). The Company’s corporate headquarters are located in Chicago, Illinois and the Company also operates property management offices in each of its markets. As of December 31, 2010, the Company had approximately 4,000 employees who provided real estate operations, leasing, legal, financial, accounting, acquisition, disposition, development and other support functions.
EQR is the general partner of, and as of December 31, 2010 owned an approximate 95.5% ownership interest in, ERP Operating Limited Partnership, an Illinois limited partnership (the “Operating Partnership”). All of EQR’s property ownership, development and related business operations are conducted through the Operating Partnership and its subsidiaries. References to the “Company” include EQR, the Operating Partnership and those entities owned or controlled by the Operating Partnership and/or EQR.
Business Objectives and Operating and Investing Strategies
The Company invests in apartment communities located in strategically targeted markets with the goal of maximizing our risk adjusted total return (operating income plus capital appreciation) on invested capital.
Our operating focus is on balancing occupancy and rental rates to maximize our revenue while exercising tight cost control to generate the highest possible return to our shareholders. Revenue is maximized by driving qualified
resident prospects to our properties, converting this traffic cost-effectively into new leases at the highest rent possible, keeping our residents satisfied and renewing their leases at yet higher rents. While we believe that it is our high-quality, well-located assets that bring our customers to us, it is our customer service that keeps them renting with us and recommending us to their friends.
We use technology to engage our customers in the way that they want to be engaged. Many of our residents utilize our web-based resident portal which allows them to review their account and make payments, provide feedback and make service requests on-line.
We seek to maximize capital appreciation of our properties by investing in markets that are characterized by conditions favorable to multifamily property appreciation. These markets generally feature one or more of the following:
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High barriers to entry where, because of land scarcity or government regulation, it is difficult or costly to build new apartment properties leading to low supply;
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High single family home prices making our apartments a more economical housing choice;
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Strong economic growth leading to household formation and job growth, which in turn leads to high demand for our apartments; and
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An attractive quality of life leading to high demand and retention and allowing us to more readily increase rents.
Acquisitions and developments may be financed from various sources of capital, which may include retained cash flow, issuance of additional equity and debt securities, sales of properties, joint venture agreements and collateralized and uncollateralized borrowings. In addition, the Company may acquire properties in transactions that include the issuance of limited partnership interests in the Operating Partnership (“OP Units”) as consideration for the acquired properties. Such transactions may, in certain circumstances, enable the sellers to defer, in whole or in part, the recognition of taxable income or gain that might otherwise result from the sales. EQR may also acquire land parcels to hold and/or sell based on market opportunities. The Company may also seek to acquire properties by purchasing defaulted or distressed debt that encumbers desirable properties in the hope of obtaining title to property through foreclosure or deed-in-lieu of foreclosure proceedings. The Company has also, in the past, converted some of its properties and sold them as condominiums but is not currently active in this line of business.
The Company primarily sources the funds for its new property acquisitions in its core markets with the sales proceeds from selling assets that are older or located in non-core markets. During the last five years, the Company has sold over 97,000 apartment units for an aggregate sales price of $7.2 billion and acquired nearly 25,000 apartment units in its core markets for approximately $5.5 billion. We are currently acquiring and developing assets primarily in the following targeted metropolitan areas: Boston, New York, Washington DC, South Florida, Southern California, San Francisco, Seattle and to a lesser extent Denver. We also have investments (in the aggregate about 18% of our NOI) in other markets including Atlanta, Phoenix, Portland, Oregon, New England excluding Boston, Tampa, Orlando and Jacksonville but do not intend to acquire or develop assets in these markets.
As part of its strategy, the Company purchases completed and fully occupied apartment properties, partially completed or partially unoccupied properties or land on which apartment properties can be constructed. We intend to hold a diversified portfolio of assets across our target markets. Currently, no single metropolitan area accounts for more than 17% of our NOI, though no guarantee can be made that NOI concentration may not increase in the future.
We endeavor to attract and retain the best employees by providing them with the education, resources and opportunities to succeed. We provide many classroom and on-line training courses to assist our employees in interacting with prospects and residents as well as extensively train our customer service specialists in maintaining the equipment and appliances on our property sites. We actively promote from within and many senior corporate and property leaders have risen from entry level or junior positions. We monitor our employees’ engagement by surveying them annually and have consistently received high engagement scores.
We have a commitment to sustainability and consider the environmental impacts of our business activities. With its high density, multifamily housing is, by its nature, an environmentally friendly property type. Our recent acquisition and development activities have been primarily concentrated in pedestrian-friendly urban locations near public transportation. When developing and renovating our properties, we strive to reduce energy and water usage by investing in energy saving technology while positively impacting the experience of our residents and the value of our assets. We continue to implement a combination of irrigation, lighting and HVAC improvements at our properties that will reduce energy and water consumption.
Current Environment
Through much of 2009, the Company assumed a highly cautious outlook given uncertainty in the general economy and the capital markets and expected reduction in our property operations. In late 2009, the Company saw that occupancy was
firming. This was an especially encouraging sign as it came during the Company’s seasonally slower fourth quarter. At the same time, the Company also saw marked improvement in the capital markets. In response, the Company began acquiring assets and increasing rents for both new and renewing residents, which led to better operating and investment performance for the Company. 2010 was characterized by higher occupancy and rent levels than 2009. The Company increased rents to a greater extent in markets like the Northeast, where the economy was stronger and multifamily operating conditions were better. In 2010, the Company ceased to hold the large cash balances (often $1.0 billion or more) that it held in 2009 in anticipation of debt maturities in an unsure capital markets climate. This had the result of increasing the Company’s earnings by decreasing debt prefunding costs. Finally, the Company was aggressive in acquiring $1.5 billion of assets in its target markets in 2010. Improvement materialized throughout 2010 and as we enter 2011, we expect strong growth in same store revenue (anticipated increases ranging from 4.0% to 5.0%) and NOI (anticipated increases ranging from 5.0% to 7.5%) and are optimistic that the improvement realized in 2010 will be sustained for the foreseeable future.
We currently have access to multiple sources of capital including the equity markets as well as both the secured and unsecured debt markets. In July 2010, the Company completed a $600.0 million unsecured ten year notes offering with a coupon of 4.75% and an all-in effective interest rate of 5.09%. The all-in rate combined with its accretive nature compared to maturing 2011 fixed rate debt led the Company to pursue this transaction. The Company also raised $291.9 million in equity under its ATM Common Share offering program in 2010 and has raised an additional $154.5 million under this program thus far in 2011.
Given the strong market for many of our disposition assets and increased competition for assets in our target markets, we expect to be a net seller of assets in 2011 in contrast to being a net buyer of assets in 2010. The Company acquired 16 consolidated properties consisting of 4,445 apartment units for $1.5 billion and six land parcels for $68.9 million during the year ended December 31, 2010. While competition for the properties we were interested in acquiring increased as 2010 progressed due to the overall improvement in market fundamentals, we were able to close several, of what we believe are, long-term, value added acquisition opportunities. Our acquisition pipeline has moderated and we expect a greater concentration of our 2011 acquisitions to occur in the latter half of the year. We believe our access to capital, our ability to execute large, complex transactions and our ability to efficiently stabilize large scale lease up properties provide us with a competitive advantage. During the year ended December 31, 2010, the Company sold 35 consolidated properties consisting of 7,171 apartment units for $718.4 million and 27 unconsolidated properties consisting of 6,275 apartment units generating cash proceeds to the Company of $26.9 million, as well as 2 condominium units for $0.4 million and one land parcel for $4.0 million. We expect to continue strategic dispositions and see an increase in dispositions in 2011 as we believe there is currently a robust market and favorable pricing for certain of our non-strategic assets. Our dispositions in 2010 were at higher capitalization (“cap”) rates (see definition in Results of Operations) than the acquisitions we completed. We expect this to continue in 2011 and expect to experience dilution from past and future transactions.
We believe that cash and cash equivalents, securities readily convertible to cash, current availability on our revolving credit facility and disposition proceeds for 2011 will provide sufficient liquidity to meet our funding obligations relating to asset acquisitions, debt maturities and existing development projects through 2011. We expect that our remaining longer-term funding requirements will be met through some combination of new borrowings, equity issuances (including the Company’s ATM share offering program), property dispositions, joint ventures and cash generated from operations. There is significant uncertainty surrounding the futures of Fannie Mae and Freddie Mac. Any changes to their mandates could have a significant impact on the Company and may, among other things, lead to lower values for our disposition assets and higher interest rates on our borrowings. Such changes may also provide an advantage to us by making the cost of financing single family home ownership more expensive and provide us a competitive advantage given the size of our balance sheet and the multiple sources of capital to which we have access.
We believe that the Company is well-positioned as of December 31, 2010 (our properties are geographically diverse and were approximately 94.1% occupied (94.5% on a same store basis)), little new multifamily rental supply will be added to most of our markets over the next several years and the long-term demographic picture is positive. We believe our strong balance sheet and ample liquidity will allow us to fund our debt maturities and development fundings in the near term, and should also allow us to take advantage of investment opportunities in the future. As economic conditions continue to improve, the short-term nature of our leases and the limited supply of new rental housing being constructed should allow us to realize revenue growth and improvement in our operating results.
The Company anticipates that 2011 same store expenses will only increase 1.0% to 2.0% primarily due to modest increases in payroll expenses, real estate tax rates and utility cost growth (same store expenses increased 0.9% for 2010 when compared with the same period in the prior year). This follows three consecutive years of excellent expense control (same store expenses declined 0.1% between 2009 and 2008 and grew 2.2% between 2008 and 2007 and 2.1% between 2007 and 2006).
The current environment information presented above is based on current expectations and is forward-looking.
Results of Operations
In conjunction with our business objectives and operating strategy, the Company continued to invest in apartment properties located in strategically targeted markets during the years ended December 31, 2010 and December 31, 2009. In summary, we:
Year Ended December 31, 2010:
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Acquired $1.1 billion of apartment properties consisting of 14 consolidated properties and 3,207 apartment units at a weighted average cap rate (see definition below) of 5.4% and six land parcels for $68.9 million, all of which we deem to be in our strategic targeted markets;
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Acquired one unoccupied property in the second quarter of 2010 (425 Mass in Washington, D.C.) for $166.8 million consisting of 559 apartment units that is expected to stabilize in its third year of ownership at an 8.5% yield on cost and one property in the third quarter of 2010 (Vantage Pointe in San Diego, CA) for $200.0 million consisting of 679 apartment units that was in the early stages of lease up and is expected to stabilize in its third year of ownership at a 7.0% yield on cost;
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Acquired the 75% equity interest it did not own in seven previously unconsolidated properties consisting of 1,811 apartment units at an implied cap rate of 8.4% in exchange for an approximate $30.0 million payment to its joint venture partner;
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Sold $718.4 million of consolidated apartment properties consisting of 35 properties and 7,171 apartment units at a weighted average cap rate of 6.7%, 2 condominium units for $0.4 million and one land parcel for $4.0 million, the majority of which was in exit or less desirable markets; and
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Sold the last of its 25% equity interests in an institutional joint venture consisting of 27 unconsolidated properties containing 6,275 apartment units. These properties were valued in their entirety at $417.8 million which results in an implied weighted average cap rate of 7.5% (generating cash to the Company, net of debt repayments, of $26.9 million).
Year Ended December 31, 2009:
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Acquired $145.0 million of apartment properties consisting of two properties and 566 apartment units (excluding the Company’s buyout of its partner’s interest in one previously unconsolidated property) and a long-term leasehold interest in a land parcel for $11.5 million, all of which we deem to be in our strategic targeted markets; and
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Sold $1.0 billion of apartment properties consisting of 60 properties and 12,489 apartment units (excluding the Company’s buyout of its partner’s interest in one previously unconsolidated property), as well as 62 condominium units for $12.0 million, the majority of which was in exit or less desirable markets.
The Company’s primary financial measure for evaluating each of its apartment communities is net operating income (“NOI”). NOI represents rental income less property and maintenance expense, real estate tax and insurance expense and property management expense. The Company believes that NOI is helpful to investors as a supplemental measure of its operating performance because it is a direct measure of the actual operating results of the Company’s apartment communities. The cap rate is generally the first year NOI yield (net of replacements) on the Company’s investment.
Properties that the Company owned for all of both 2010 and 2009 (the “2010 Same Store Properties”), which represented 112,042 apartment units, impacted the Company’s results of operations. Properties that the Company owned for all of both 2009 and 2008 (the “2009 Same Store Properties”), which represented 113,598 apartment units, also impacted the Company’s results of operations. Both the 2010 Same Store Properties and 2009 Same Store Properties are discussed in the following paragraphs.
The Company’s acquisition, disposition and completed development activities also impacted overall results of operations for the years ended December 31, 2010 and 2009. Dilution, as a result of the Company’s net asset sales in 2009, partially offset by net asset acquisitions and lease up activity in 2010, negatively impacts property net operating income. The impacts of these activities are discussed in greater detail in the following paragraphs.
Comparison of the year ended December 31, 2010 to the year ended December 31, 2009
For the year ended December 31, 2010, the Company reported diluted earnings per share of $0.95 compared to $1.27 per share for the year ended December 31, 2009. The difference is primarily due to $37.3 million in lower gains from property sales in 2010 vs. 2009 and $34.3 million in higher impairment losses in 2010 vs. 2009.
For the year ended December 31, 2010, loss from continuing operations increased approximately $22.8 million when compared to the year ended December 31, 2009. The decrease in continuing operations is discussed below.
Revenues from the 2010 Same Store Properties decreased $2.1 million primarily as a result of a decrease in average rental rates charged to residents, partially offset by an increase in occupancy. Expenses from the 2010 Same Store Properties increased $6.2 million primarily due to increases in repairs and maintenance expenses (mostly due to greater storm-related costs such as snow removal and roof repairs incurred during the first quarter of 2010), higher property management costs and increases in utility costs, partially offset by lower real estate taxes and leasing and advertising expenses. The following tables provide comparative same store results and statistics for the 2010 Same Store Properties:
2010 vs.
Same Store Results/Statistics
$ in thousands (except for Average Rental Rate) - 112,042 Same Store Units
(1)
Average rental rate is defined as total rental revenues divided by the weighted average occupied units for the period.
The following table provides comparative same store operating expenses for the 2010 Same Store Properties:
2010 vs.
Same Store Operating Expenses
$ in thousands - 112,042 Same Store Units
(1)
On-site payroll - Includes payroll and related expenses for on-site personnel including property managers, leasing consultants and maintenance staff.
(2)
Utilities - Represents gross expenses prior to any recoveries under the Resident Utility Billing System (“RUBS”). Recoveries are reflected in rental income.
(3)
Repairs and maintenance - Includes general maintenance costs, unit turnover costs including interior painting, routine landscaping, security, exterminating, fire protection, snow removal, elevator, roof and parking lot repairs and other miscellaneous building repair costs.
(4)
Property management costs - Includes payroll and related expenses for departments, or portions of departments, that directly support on-site management. These include such departments as regional and corporate property management, property accounting, human resources, training, marketing and revenue management, procurement, real estate tax, property legal services and information technology.
(5)
Other on-site operating expenses - Includes administrative costs such as office supplies, telephone and data charges and association and business licensing fees.
The following table presents a reconciliation of operating income per the consolidated statements of operations to NOI for the 2010 Same Store Properties.
For properties that the Company acquired prior to January 1, 2010 and expects to continue to own through December 31, 2011, the Company anticipates the following same store results for the full year ending December 31, 2011:
The Company anticipates consolidated rental acquisitions of $1.0 billion and consolidated rental dispositions of $1.25 billion and expects that acquisitions will have a 1.25% lower cap rate than dispositions for the full year ending December 31, 2011.
These 2011 assumptions are based on current expectations and are forward-looking.
Non-same store operating results increased approximately $84.6 million and consist primarily of properties acquired in calendar years 2009 and 2010, as well as operations from the Company’s completed development properties and corporate housing business. While the operations of the non-same store assets have been negatively impacted during the year ended December 31, 2010 similar to the same store assets, the non-same store assets have contributed a greater percentage of total NOI to the Company’s overall operating results primarily due to increasing occupancy for properties in lease-up and a longer ownership period in 2010 than 2009. This increase primarily resulted from:
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Development and other miscellaneous properties in lease-up of $32.4 million;
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Newly stabilized development and other miscellaneous properties of $0.2 million;
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Properties acquired in 2009 and 2010 of $56.2 million; and
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Partially offset by an allocation of property management costs not included in same store results and operating activities from other miscellaneous operations, such as the Company’s corporate housing business.
See also Note 19 in the Notes to Consolidated Financial Statements for additional discussion regarding the Company’s segment disclosures.
Fee and asset management revenues, net of fee and asset management expenses, increased approximately $1.5 million or 53.4% primarily due to an increase in revenue earned on management of the Company’s military housing ventures at Fort Lewis and McChord Air Force Base, as well as a decrease in asset management expenses, partially offset by the unwinding of the Company’s institutional joint ventures during 2010 (see Note 6 in the Notes to Consolidated Financial Statements for further discussion).
Property management expenses from continuing operations include off-site expenses associated with the self-management of the Company’s properties as well as management fees paid to any third party management companies. These expenses increased approximately $9.2 million or 12.8%. This increase is primarily attributable to an increase in payroll-related costs (due primarily to higher health insurance and bonus costs, acceleration of long-term compensation expense for retirement eligible employees and the creation of the Company’s central business group, which moved administrative functions off-site), legal and professional fees, education/conference expenses, real estate tax consulting fees and travel expenses.
Depreciation expense from continuing operations, which includes depreciation on non-real estate assets, increased approximately $97.4 million or 17.4% primarily as a result of additional depreciation expense on properties acquired in 2009 and 2010, development properties placed in service and capital expenditures for all properties owned.
General and administrative expenses from continuing operations, which include corporate operating expenses, increased approximately $0.9 million or 2.3% primarily due to higher overall payroll-related costs (due primarily to higher bonus costs), partially offset by lower tax compliance fees and office rents. The Company anticipates that general and administrative expenses will approximate $40.0 million to $42.0 million for the year ending December 31, 2011. The above assumption is based on current expectations and is forward-looking.
Impairment from continuing operations increased approximately $34.3 million due to a $45.4 million impairment charge taken during the fourth quarter of 2010 on land held for development related to two potential development projects compared to an $11.1 million impairment charge taken during 2009 on land held for development. See Note 20 in the Notes to Consolidated Financial Statements for further discussion.
Interest and other income from continuing operations decreased approximately $11.1 million or 67.0% primarily as a result of a decrease in interest earned on cash and cash equivalents and investment securities due to lower interest rates during the year ended December 31, 2010 and lower overall balances as well as gains on debt extinguishment and the sale of investment securities recognized during the year ended December 31, 2009 that did not reoccur in 2010, partially offset by an increase in insurance/litigation settlement proceeds. The Company anticipates that interest and other income will approximate $2.0 million to $3.0 million for the year ending December 31, 2011. The above assumption is based on current expectations and is forward-looking.
Other expenses from continuing operations increased approximately $5.4 million or 83.9% primarily due to an increase in the expensing of overhead (pursuit cost write-offs) as a result of the Company’s decision to reduce its development activities in prior periods as well as an increase in property acquisition costs incurred in conjunction with the Company’s significantly higher acquisition volume in 2010.
Interest expense from continuing operations, including amortization of deferred financing costs, decreased approximately $27.8 million or 5.5% primarily as a result of lower overall debt balances and higher debt extinguishment costs due to the significant debt repurchases in 2009 and lower rates in 2010, partially offset by interest expense on the $500.0 million mortgage pool that closed in 2009, the $600.0 million of unsecured notes that closed in July 2010 and lower capitalized interest. During the year ended December 31, 2010, the Company capitalized interest costs of approximately $13.0 million as compared to $34.9 million for the year ended December 31, 2009. This capitalization of interest primarily relates to consolidated projects under development. The effective interest cost on all indebtedness for the year ended December 31, 2010 was 5.14% as compared to 5.62% for the year ended December 31, 2009. The Company anticipates that interest expense (excluding debt extinguishment costs and convertible debt discounts) will approximate $470.0 million to $480.0 million for the year ending December 31, 2011. The above assumption is based on current expectations and is forward-looking.
Income and other tax expense from continuing operations decreased approximately $2.5 million or 88.1% primarily due to a decrease in franchise taxes for Texas and a decrease in business taxes for Washington, D.C. The Company anticipates that income and other tax expense will approximate $0.5 million to $1.5 million for the year ending December 31, 2011. The above assumption is based on current expectations and is forward-looking.
Loss from investments in unconsolidated entities decreased approximately $2.1 million or 73.9% as compared to the year ended December 31, 2009 primarily due to the Company’s $1.8 million share of defeasance costs incurred in conjunction with the extinguishment of cross-collateralized mortgage debt on one of the Company’s partially owned unconsolidated joint ventures taken during the year ended December 31, 2009 that did not reoccur in 2010.
Net gain on sales of unconsolidated entities increased approximately $17.4 million primarily due to larger gains on sale and revaluation of seven previously unconsolidated properties that were acquired from the Company’s joint venture partner and the gain on sale for 27 properties sold during the year ended December 31, 2010 compared with unconsolidated properties sold in the same period in 2009.
Net loss on sales of land parcels increased approximately $1.4 million primarily due to the loss on sale of one land parcel during the year ended December 31, 2010.
Discontinued operations, net decreased approximately $63.3 million or 16.7% between the periods under comparison. This decrease is primarily due to lower gains from property sales during the year ended December 31, 2010 compared to the same period in 2009 and the operations of those properties. In addition, properties sold in 2010 reflect operations for none of or a
partial period in 2010 in contrast to a full or partial period in 2009. See Note 13 in the Notes to Consolidated Financial Statements for further discussion.
Comparison of the year ended December 31, 2009 to the year ended December 31, 2008
For the year ended December 31, 2009, the Company reported diluted earnings per share of $1.27 compared to $1.46 per share for the year ended December 31, 2008. The difference is primarily due to the following:
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$57.6 million in lower net gains on sales of discontinued operations in 2009 vs. 2008;
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$84.0 million in lower property NOI in 2009 vs. 2008, primarily driven by $51.6 million in lower same store NOI and dilution from transaction activities, partially offset by higher NOI contributions from lease-up properties; and
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Partially offset by $105.3 million in lower impairment losses in 2009 vs. 2008.
For the year ended December 31, 2009, income from continuing operations increased approximately $43.0 million when compared to the year ended December 31, 2008. The increase in continuing operations is discussed below.
Revenues from the 2009 Same Store Properties decreased $52.4 million primarily as a result of a decrease in average rental rates charged to residents and a decrease in occupancy. Expenses from the 2009 Same Store Properties decreased $0.8 million primarily due to lower property management costs, partially offset by higher real estate taxes and utility costs. The following tables provide comparative same store results and statistics for the 2009 Same Store Properties:
2009 vs.
Same Store Results/Statistics
$ in thousands (except for Average Rental Rate) - 113,598 Same Store Units
(1)
Average rental rate is defined as total rental revenues divided by the weighted average occupied units for the period.
The following table provides comparative same store operating expenses for the 2009 Same Store Properties:
2009 vs.
Same Store Operating Expenses
$ in thousands - 113,598 Same Store Units
(1)
On-site payroll - Includes payroll and related expenses for on-site personnel including property managers, leasing consultants and maintenance staff.
(2)
Utilities - Represents gross expenses prior to any recoveries under the Resident Utility Billing System (“RUBS”). Recoveries are reflected in rental income.
(3)
Repairs and maintenance - Includes general maintenance costs, unit turnover costs including interior painting, routine landscaping, security, exterminating, fire protection, snow removal, elevator, roof and parking lot repairs and other miscellaneous building repair costs.
(4)
Property management costs - Includes payroll and related expenses for departments, or portions of departments, that directly support on-site management. These include such departments as regional and corporate property management, property accounting, human resources, training, marketing and revenue management, procurement, real estate tax, property legal services and information technology.
(5)
Other on-site operating expenses - Includes administrative costs such as office supplies, telephone and data charges and association and business licensing fees.
Non-same store operating results increased approximately $34.3 million or 79.4% and consist primarily of properties acquired in calendar years 2008 and 2009, as well as operations from the Company’s completed development properties and our corporate housing business. While the operations of the non-same store assets have been negatively impacted during the year ended December 31, 2009 similar to the same store assets, the non-same store assets have contributed a greater percentage of total NOI to the Company’s overall operating results primarily due to increasing occupancy for properties in lease-up and a longer ownership period in 2009 than 2008. This increase primarily resulted from:
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Development and other miscellaneous properties in lease-up of $22.4 million;
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Newly stabilized development and other miscellaneous properties of $1.6 million;
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Properties acquired in 2008 and 2009 of $11.9 million; and
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Partially offset by operating activities from other miscellaneous operations.
See also Note 19 in the Notes to Consolidated Financial Statements for additional discussion regarding the Company’s segment disclosures.
Fee and asset management revenues, net of fee and asset management expenses, increased approximately $0.1 million or 3.4% primarily due to an increase in revenue earned on management of the Company’s military housing ventures at Fort Lewis and McChord Air Force Base, as well as a decrease in asset management expenses. As of December 31, 2009 and 2008, the Company managed 12,681 apartment units and 14,485 apartment units, respectively, primarily for unconsolidated entities and its military housing ventures at Fort Lewis and McChord.
Property management expenses from continuing operations include off-site expenses associated with the self-management of the Company’s properties as well as management fees paid to any third party management companies. These expenses decreased approximately $5.1 million or 6.7%. This decrease is primarily attributable to lower overall payroll-related costs as a result of a decrease in the number of properties in the Company’s portfolio, as well as decreases in temporary help/contractors, telecommunications and travel expenses.
Depreciation expense from continuing operations, which includes depreciation on non-real estate assets, increased approximately $23.0 million or 4.3% primarily as a result of additional depreciation expense on properties acquired in 2008 and 2009, development properties placed in service and capital expenditures for all properties owned.
General and administrative expenses from continuing operations, which include corporate operating expenses, decreased approximately $6.0 million or 13.3% primarily due to lower overall payroll-related costs as a result of a decrease in the number of properties in the Company’s portfolio, as well as a $2.9 million decrease in severance related costs in 2009 and a decrease in tax consulting costs.
Impairment from continuing operations decreased approximately $105.3 million due to an $11.1 million impairment charge taken during 2009 on a land parcel held for development compared to a $116.4 million impairment charge taken in the fourth quarter of 2008 on land held for development related to five potential development projects that are no longer being pursued. See Note 20 in the Notes to Consolidated Financial Statements for further discussion.
Interest and other income from continuing operations decreased approximately $16.8 million or 50.3% primarily as a result of an $18.7 million gain recognized during 2008 related to the partial debt extinguishment of the Company’s notes compared to a $4.5 million gain recognized in 2009 (see Note 9). In addition, interest earned on cash and cash equivalents decreased due to a decrease in interest rates and because the Company received less insurance/litigation settlement proceeds and forfeited deposits in 2009, partially offset by a $4.9 million gain on the sale of investment securities realized in 2009.
Other expenses from continuing operations increased approximately $0.7 million or 12.6% primarily due to an increase in transaction costs incurred in conjunction with the Company’s acquisition of two properties consisting of 566 apartment units from unaffiliated parties, as well as expensing transaction costs associated with the Company’s acquisition of all of its partners’ interests in five previously partially owned properties consisting of 1,587 apartment units in 2009.
Interest expense from continuing operations, including amortization of deferred financing costs, increased approximately $16.9 million or 3.4% primarily as a result of an increase in debt extinguishment costs and lower capitalized interest. During the year ended December 31, 2009, the Company capitalized interest costs of approximately $34.9 million as compared to $60.1 million for the year ended December 31, 2008. This capitalization of interest primarily relates to consolidated projects under development. The effective interest cost on all indebtedness for the year ended December 31, 2009 was 5.62% as compared to 5.56% for the year ended December 31, 2008.
Income and other tax expense from continuing operations decreased approximately $2.5 million or 46.9% primarily due to a change in the estimate for Texas state taxes and lower overall state income taxes, partially offset by an increase in business taxes for Washington, D.C.
Loss from investments in unconsolidated entities increased approximately $2.7 million as compared to the year ended December 31, 2008 primarily due to the Company’s $1.8 million share of defeasance costs incurred in conjunction with the extinguishment of cross-collateralized mortgage debt on one of the Company’s partially owned unconsolidated joint ventures as well as a decline in the operating performance of these properties.
Net gain on sales of unconsolidated entities increased approximately $7.8 million as the Company sold seven unconsolidated properties in 2009 (inclusive of the one property where the Company acquired its partners’ interest) compared to three unconsolidated properties in 2008.
Net gain on sales of land parcels decreased approximately $3.0 million due to the sale of vacant land located in Florida during the year ended December 31, 2008 versus no land sales in 2009.
Discontinued operations, net decreased approximately $97.4 million or 20.4% between the periods under comparison. This decrease is primarily due to lower gains from property sales during the year ended December 31, 2009 compared to the same period in 2008 and the operations of those properties. In addition, properties sold in 2009 reflect operations for a partial period in 2009 in contrast to a full period in 2008. See Note 13 in the Notes to Consolidated Financial Statements for further discussion.
Liquidity and Capital Resources
For the Year Ended December 31, 2010
As of January 1, 2010, the Company had approximately $193.3 million of cash and cash equivalents, its restricted 1031 exchange proceeds totaled $244.3 million and it had $1.37 billion available under its revolving credit facility (net of $56.7 million which was restricted/dedicated to support letters of credit and $75.0 million which had been committed by a now bankrupt financial institution and is 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 Company’s cash and cash equivalents balance at December 31, 2010 was approximately $431.4 million, its restricted 1031 exchange proceeds totaled $103.9 million and the amount available on the Company’s revolving credit facility was $1.28 billion (net of $147.3 million which was restricted/dedicated to support letters of credit and net of the $75.0 million discussed above).
During the year ended December 31, 2010, the Company generated proceeds from various transactions, which included the following:
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Disposed of 35 consolidated properties, 27 unconsolidated properties, 2 condominium units and one land parcel, receiving net proceeds of approximately $699.6 million;
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Obtained $173.6 million in new mortgage financing;
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Issued $600.0 million of unsecured notes receiving net proceeds of $595.4 million before underwriting fees and other expenses; and
n
Issued approximately 8.8 million Common Shares (including shares issued under the ATM program - see further discussion below) and received net proceeds of $406.2 million.
During the year ended December 31, 2010, the above proceeds were primarily utilized to:
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Acquire 16 rental properties and six land parcels for approximately $1.2 billion;
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Acquire the 75% equity interest it did not own in seven previously unconsolidated properties consisting of 1,811 apartment units in exchange for an approximate $26.9 million payment to its joint venture partner (net of $3.1 million in cash acquired);
n
Invest $131.3 million primarily in development projects;
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Repurchase 58,130 Common Shares, utilizing cash of $1.9 million (see Note 3);
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Repay $652.1 million of mortgage loans; and
n
Settle a forward starting swap, utilizing cash of $10.0 million.
In September 2009, the Company announced the establishment of an At-The-Market (“ATM”) share offering program which would allow the Company to sell up to 17.0 million Common Shares from time to time over the next three years into the existing trading market at current market prices as well as through negotiated transactions. The Company may, but shall have no obligation to, sell Common Shares through the ATM share offering program in amounts and at times to be determined by the Company. Actual sales will depend on a variety of factors to be determined by the Company from time to time, including (among others) market conditions, the trading price of the Company’s Common Shares and determinations of the appropriate sources of funding for the Company. During the year ended December 31, 2010, the Company issued approximately 6.2 million Common Shares at an average price of $47.45 per share for total consideration of approximately $291.9 million through the ATM share offering program. During the year ended December 31, 2009, the Company issued approximately 3.5 million Common Shares at an average price of $35.38 per share for total consideration of approximately $123.7 million through the ATM share offering program. In addition, during the first quarter of 2011 through January 13, 2011, the Company has issued approximately 3.0 million Common Shares at an average price of $50.84 per share for total consideration of approximately $154.5 million. The Company has not issued any shares under this program since January 13, 2011. Through February 16, 2011, the Company has cumulatively issued approximately 12.7 million Common Shares at an average price of $44.94 per share for total consideration of approximately $570.1 million. Including its recently filed prospectus supplement which added 5,687,478 Common Shares, the Company has 10.0 million Common Shares remaining available for issuance under the ATM program.
Depending on its analysis of market prices, economic conditions and other opportunities for the investment of available capital, the Company may repurchase its Common Shares pursuant to its existing share repurchase program authorized by the Board of Trustees. The Company repurchased $1.9 million (58,130 shares at an average price per share of $32.46) of its Common Shares (all related to the vesting of employee restricted shares) during the year ended December 31, 2010. As of December 31, 2010, the Company had authorization to repurchase an additional $464.6 million of its shares. See Note 3 in the Notes to Consolidated Financial Statements for further discussion.
Depending on its analysis of prevailing market conditions, liquidity requirements, contractual restrictions and other factors, the Company may from time to time seek to repurchase and retire its outstanding debt in open market or privately negotiated transactions.
The Company’s total debt summary and debt maturity schedules as of December 31, 2010 are as follows:
Debt Summary as of December 31, 2010
(Amounts in thousands)
(1)
Net of the effect of any derivative instruments. Weighted average rates are for the year ended December 31, 2010.
Note: The Company capitalized interest of approximately $13.0 million and $34.9 million during the years ended December 31, 2010 and 2009, respectively.
Debt Maturity Schedule as of December 31, 2010
(Amounts in thousands)
Weighted Average
Weighted Average
Fixed
Floating
Rates on Fixed
Rates on
Year
Rate (1)
Rate (1)
Total
% of Total
Rate Debt (1)
Total Debt (1)
$
906,266
(2)
$
759,725
(3)
$
1,665,991
16.8
%
5.28
%
3.49
%
778,181
38,128
816,309
8.2
%
5.65
%
5.57
%
269,159
309,828
578,987
5.8
%
6.72
%
4.89
%
562,583
22,034
584,617
5.9
%
5.31
%
5.24
%
357,713
-
357,713
3.6
%
6.40
%
6.40
%
1,167,662
-
1,167,662
11.7
%
5.33
%
5.33
%
1,355,830
1,356,286
13.6
%
5.87
%
5.87
%
80,763
44,677
125,440
1.3
%
5.72
%
4.28
%
801,754
20,766
822,520
8.3
%
5.49
%
5.36
%
1,671,836
1,672,645
16.8
%
5.50
%
5.50
%
2021+
255,506
544,400
799,906
8.0
%
6.62
%
2.67
%
Total
$
8,207,253
$
1,740,823
$
9,948,076
100.0
%
5.63
%
4.93
%
(1)
Net of the effect of any derivative instruments. Weighted average rates are as of December 31, 2010.
(2)
Includes $482.5 million face value of 3.85% convertible unsecured debt with a final maturity of 2026. The notes are callable by the Company on or after August 18, 2011. The notes are putable by the holders on August 18, 2011, August 15, 2016 and August 15, 2021.
(3)
Includes the Company’s $500.0 million term loan facility, which originally matured on October 5, 2010. Effective April 12, 2010, the Company exercised the first of its two one-year extension options. As a result, the maturity date is now October 5, 2011 and there is one remaining one-year extension option exercisable by the Company.
The following table provides a summary of the Company’s unsecured debt as of December 31, 2010:
Unsecured Debt Summary as of December 31, 2010
(Amounts in thousands)
(1)
$300.0 million in fair value interest rate swaps converts a portion of the 5.200% notes due April 1, 2013 to a floating interest rate.
(2)
Convertible notes mature on August 15, 2026. The notes are callable by the Company on or after August 18, 2011. The notes are putable by the holders on August 18, 2011, August 15, 2016 and August 15, 2021.
(3)
Facilities are private. All other unsecured debt is public.
(4)
Represents the Company’s $500.0 million term loan facility, which originally matured on October 5, 2010. Effective April 12, 2010, the Company exercised the first of its two one-year extension options. As a result, the maturity date is now October 5, 2011 and there is one remaining one-year extension option exercisable by the Company.
(5)
As of December 31, 2010, there was approximately $1.28 billion available on the Company’s unsecured revolving credit facility.
An unlimited amount of equity and debt securities remains available for issuance by EQR and the Operating Partnership under effective shelf registration statements filed with the SEC. Most recently, EQR and the Operating Partnership filed a universal shelf registration statement for an unlimited amount of equity and debt securities that became automatically effective upon filing with the SEC in October 2010 (under SEC regulations enacted in 2005, the registration statement automatically expires on October 14, 2013 and does not contain a maximum issuance amount). However, as of February 16, 2011, issuances under the ATM share offering program are limited to 10.0 million additional shares.
The Company’s “Consolidated Debt-to-Total Market Capitalization Ratio” as of December 31, 2010 is presented in the following table. The Company calculates the equity component of its market capitalization as the sum of (i) the total outstanding Common Shares and assumed conversion of all Units at the equivalent market value of the closing price of the Company’s Common Shares on the New York Stock Exchange and (ii) the liquidation value of all perpetual preferred shares outstanding.
Capital Structure as of December 31, 2010
(Amounts in thousands except for share/unit and per share amounts)
Perpetual Preferred Equity as of December 31, 2010
(Amounts in thousands except for share and per share amounts)
On November 1, 2010, the Company redeemed its Series E and Series H Cumulative Convertible Preferred Shares for cash consideration of $0.8 million and 355,539 Common Shares.
The Company generally 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, through its working capital, net cash provided by operating activities and borrowings under its revolving credit facility. Under normal operating conditions, the Company considers its cash provided by operating activities to be adequate to meet operating requirements and payments of distributions. However, there may be times when the Company experiences shortfalls in its coverage of distributions, which may cause the Company to consider reducing its distributions and/or using the proceeds from property dispositions or additional financing transactions to make up the difference. Should these shortfalls occur for lengthy periods of time or be material in nature, the Company’s financial condition may be adversely affected and it may not be able to maintain its current distribution levels. The Company reduced its quarterly common share dividend beginning with the dividend for the third quarter of 2009, from $0.4825 per share to $0.3375 per share.
During the fourth quarter of 2010, the Company announced a new dividend policy which it believes will generate payouts more closely aligned with the actual annual operating results of the Company’s core business and provide transparency to investors. The Company intends to pay an annual cash dividend equal to approximately 65% of Normalized FFO. During the year ended December 31, 2010, the Company paid $0.3375 per share for each of the first three quarters and $0.4575 per share for the fourth quarter to bring the total payment for the year (an annual rate of $1.47 per share) to approximately 65% of Normalized FFO. The Company anticipates the expected dividend payout will be $1.56 to $1.62 per share ($0.3375 per share for each of the first three quarters with the balance for the fourth quarter) for the year ending December 31, 2011. The above assumption is based on current expectations and is forward-looking. While the new dividend policy makes it less likely that the Company will over distribute, it will also lead to a dividend reduction more quickly than in the past should operating results deteriorate. The Company believes that its expected 2011 operating cash flow will be sufficient to cover capital expenditures and distributions.
The Company also expects to meet its long-term liquidity requirements, such as scheduled unsecured note and mortgage debt maturities, property acquisitions, financing of construction and development activities and capital improvements through the issuance of secured and unsecured debt and equity securities, including additional OP Units, and proceeds received from the disposition of certain properties as well as joint ventures. In addition, the Company 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 Company must maintain in order to comply with covenants under its unsecured notes and line of credit. Of the $19.7 billion in investment in real estate on the Company’s balance sheet at December 31, 2010, $12.6 billion or 63.9%, was unencumbered. However, there can be no assurances that these sources of capital will be available to the Company in the future on acceptable terms or otherwise.
The Operating Partnership’s credit ratings from Standard & Poor’s (“S&P”), Moody’s and Fitch for its outstanding senior debt are BBB+, Baal and BBB+, respectively. The Company’s equity ratings from S&P, Moody’s and Fitch for its outstanding preferred equity are BBB+, Baa2 and BBB-, respectively. During the fourth quarter of 2010, Fitch downgraded the Operating Partnership’s credit rating from A- to BBB+ and the Company’s equity rating from BBB+ to BBB-, which does not have an effect on the Company’s cost of funds. During the first quarter of 2011, Moody’s raised its outlook for both the Company and the Operating Partnership from negative outlook to stable outlook.
The Operating Partnership has a $1.425 billion (net of $75.0 million which had been committed by a now bankrupt financial institution and is not available for borrowing) long-term revolving credit facility with available borrowings as of February 16, 2011 of $1.34 billion (net of $83.8 million which was restricted/dedicated to support letters of credit and net of the $75.0 million discussed above) that matures in February 2012 (See Note 10 in the Notes to Consolidated Financial Statements for further discussion). This facility may, among other potential uses, be used to fund property acquisitions, costs for certain properties under development and short-term liquidity requirements.
On July 16, 2010, a portion of the parking garage collapsed at one of the Company’s rental properties (Prospect Towers in Hackensack, New Jersey). The Company estimates that the costs related to such collapse (both expensed and capitalized), including providing for residents’ interim needs, lost revenue and garage reconstruction, will be approximately $12.0 million, after insurance reimbursements of $8.0 million. Costs to rebuild the garage will be capitalized as incurred. Other costs, like those to accommodate displaced residents, lost revenue due to a portion of the property being temporarily unavailable for occupancy and legal costs, will reduce earnings as they are incurred. Generally, insurance proceeds will be recorded as increases to earnings as they are received. An impairment charge of $1.3 million was recognized to write-off the net book value of the collapsed garage. During the year ended December 31, 2010, the Company received approximately $4.0 million in insurance proceeds which fully offset the impairment charge and partially offset expenses of $5.5 million that were recorded relating to this loss and are included in real estate taxes and insurance on the consolidated statements of operations. In addition, the Company estimates that its lost revenues approximated $1.6 million during the year ended December 31, 2010 as a result of the high-rise tower being unoccupied following the garage collapse.
See Note 20 in the Notes to Consolidated Financial Statements for discussion of the events which occurred subsequent to December 31, 2010.
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:
n
Replacements (inside the unit). These include:
n
flooring such as carpets, hardwood, vinyl, linoleum or tile;
n
appliances;
n
mechanical equipment such as individual furnace/air units, hot water heaters, etc;
n
furniture and fixtures such as kitchen/bath cabinets, light fixtures, ceiling fans, sinks, tubs, toilets, mirrors, countertops, etc; and
n
blinds/shades.
All replacements are depreciated over a five-year estimated useful life. We expense as incurred all make-ready maintenance and turnover costs such as cleaning, interior painting of individual apartment units and the repair of any replacement item noted above.
n
Building improvements (outside the unit). These include:
n
roof replacement and major repairs;
n
paving or major resurfacing of parking lots, curbs and sidewalks;
n
amenities and common areas such as pools, exterior sports and playground equipment, lobbies, clubhouses, laundry rooms, alarm and security systems and offices;
n
major building mechanical equipment systems;
n
interior and exterior structural repair and exterior painting and siding;
n
major landscaping and grounds improvement; and
n
vehicles and office and maintenance equipment.
All building improvements are depreciated over a five to ten-year estimated useful life. We capitalize building improvements and upgrades only if the item: (i) exceeds $2,500 (selected projects must exceed $10,000); (ii) extends the useful life of the asset; and (iii) improves the value of the asset.
For the year ended December 31, 2010, our actual improvements to real estate totaled approximately $138.2 million. This includes the following (amounts in thousands except for apartment unit and per apartment unit amounts):
Capital Expenditures to Real Estate
For the Year Ended December 31, 2010
(1)
Total Apartment Units - Excludes 4,738 military housing apartment units for which repairs and maintenance expenses and capital expenditures to real estate are self-funded and do not consolidate into the Company’s results.
(2)
Replacements - Includes new expenditures inside the apartment units such as appliances, mechanical equipment, fixtures and flooring, including carpeting. Replacements for same store properties also include $31.7 million spent in 2010 on apartment unit renovations/rehabs (primarily kitchens and baths) on 4,331 apartment units (equating to about $7,300 per apartment unit rehabbed) designed to reposition these assets for higher rental levels in their respective markets.
(3)
Same Store Properties - Primarily includes all properties acquired or completed and stabilized prior to January 1, 2009, less properties subsequently sold.
(4)
Non-Same Store Properties - Primarily includes all properties acquired during 2009 and 2010, plus any properties in lease-up and not stabilized as of January 1, 2009. Per unit amounts are based on a weighted average of 9,141 apartment units.
(5)
Other - Primarily includes expenditures for properties sold during the period.
For the year ended December 31, 2009, our actual improvements to real estate totaled approximately $123.9 million. This includes the following (amounts in thousands except for apartment unit and per apartment unit amounts):
Capital Expenditures to Real Estate
For the Year Ended December 31, 2009
(1)
Total Apartment Units - Excludes 8,086 unconsolidated apartment units and 4,595 military housing apartment units, for which capital expenditures to real estate are self-funded and do not consolidate into the Company’s results.
(2)
Replacements - For same store properties includes $28.0 million spent on various assets related to unit renovations/rehabs (primarily kitchens and baths) designed to reposition these assets for higher rental levels in their respective markets.
(3)
Same Store Properties - Primarily includes all properties acquired or completed and stabilized prior to January 1, 2008, less properties subsequently sold.
(4)
Non-Same Store Properties - Primarily includes all properties acquired during 2008 and 2009, plus any properties in lease-up and not stabilized as of January 1, 2008. Per unit amounts are based on a weighted average of 9,823 apartment units.
(5)
Other - Primarily includes expenditures for properties sold during the period.
For 2011, the Company estimates that it will spend approximately $1,200 per apartment unit of capital expenditures for its same store properties inclusive of unit renovation/rehab costs, or $850 per apartment unit excluding unit renovation/rehab costs. For 2011, the Company estimates that it will spend $41.0 million rehabbing 5,500 apartment units (equating to about $7,500 per apartment unit rehabbed). The above assumptions are based on current expectations and are forward-looking.
During the year ended December 31, 2010, the Company’s total non-real estate capital additions, such as computer software, computer equipment, and furniture and fixtures and leasehold improvements to the Company’s property management offices and its corporate offices, were approximately $3.0 million. The Company expects to fund approximately $8.5 million in total additions to non-real estate property in 2011. The above assumption is based on current expectations and is forward-looking.
Improvements to real estate and additions to non-real estate property are generally funded from net cash provided by operating activities and from investment cash flow.
Derivative Instruments
In the normal course of business, the Company is exposed to the effect of interest rate changes. The Company seeks to manage these risks by following established risk management policies and procedures including the use of derivatives to hedge interest rate risk on debt instruments.
The Company 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 Company has not sustained a material loss from these instruments nor does it anticipate any material adverse effect on its net income or financial position in the future from the use of derivatives it currently has in place.
See Note 11 in the Notes to Consolidated Financial Statements for additional discussion of derivative instruments at December 31, 2010.
Other
Total distributions paid in January 2011 amounted to $141.3 million (excluding distributions on Partially Owned Properties), which included certain distributions declared during the fourth quarter ended December 31, 2010.
Off-Balance Sheet Arrangements and Contractual Obligations
The Company had co-invested in various properties that were unconsolidated and accounted for under the equity method of accounting. Management does not believe these investments had a materially different impact upon the Company’s liquidity, cash flows, capital resources, credit or market risk than its other property management and ownership activities. During 2000 and 2001, the Company entered into institutional ventures with an unaffiliated partner. At the respective closing dates, the Company sold and/or contributed 45 properties containing 10,846 apartment units to these ventures and retained a 25% ownership interest in the ventures. The Company’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 Company. The Company’s strategy with respect to these ventures was to reduce its concentration of properties in a variety of markets. As of December 31, 2010, the Company had sold its interest in these unconsolidated ventures with the exception of eight properties consisting of 2,061 apartment units which were acquired by the Company. All of the related debt encumbering these ventures was extinguished.
As of December 31, 2010, the Company has four projects totaling 717 apartment units in various stages of development with estimated completion dates ranging through September 30, 2012, as well as other completed development projects that are in various stages of lease up or are stabilized. The development agreements currently in place are discussed in detail in Note 18 of the Company’s Consolidated Financial Statements.
See also Notes 2 and 6 in the Notes to Consolidated Financial Statements for additional discussion regarding the Company’s investments in partially owned entities.
The following table summarizes the Company’s contractual obligations for the next five years and thereafter as of December 31, 2010:
Payments Due by Year (in thousands)
Contractual Obligations
Thereafter
Total
Debt:
Principal (a)
$
1,665,991
$
816,309
$
578,987
$
584,617
$
357,713
$
5,944,459
$
9,948,076
Interest (b)
460,045
407,793
367,642
344,599
309,043
1,016,041
2,905,163
Operating Leases:
Minimum Rent Payments (c)
5,478
4,285
4,431
4,736
4,729
320,928
344,587
Other Long-Term Liabilities:
Deferred Compensation (d)
1,457
1,770
1,485
1,677
1,677
9,182
17,248
Total
$
2,132,971
$
1,230,157
$
952,545
$
935,629
$
673,162
$
7,290,610
$
13,215,074
(a)
Amounts include aggregate principal payments only and includes in 2011 a $500.0 million term loan that the Company has the right to extend to 2012.
(b)
Amounts include interest expected to be incurred on the Company’s secured and unsecured debt based on obligations outstanding at December 31, 2010 and inclusive of capitalized interest. For floating rate debt, the current rate in effect for the most recent payment through December 31, 2010 is assumed to be in effect through the respective maturity date of each instrument.
(c)
Minimum basic rent due for various office space the Company leases and fixed base rent due on ground leases for four properties/parcels.
(d)
Estimated payments to the Company’s Chairman, Vice Chairman and two former CEO’s based on planned retirement dates.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to use judgment in the application of accounting policies, including making estimates and assumptions. If our judgment or interpretation of the facts and circumstances relating to various transactions had been different or different assumptions were made, it is possible that different accounting policies would have been applied, resulting in different financial results or different presentation of our financial statements.
The Company’s significant accounting policies are described in Note 2 in the Notes to Consolidated Financial Statements. These policies were followed in preparing the consolidated financial statements at and for the year ended December 31, 2010 and are consistent with the year ended December 31, 2009.
The Company has identified five 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 estimates is consistently applied and produces financial information that fairly presents the results of operations for all periods presented. The five critical accounting policies are:
Acquisition of Investment Properties
The Company allocates the purchase price of properties to net tangible and identified intangible assets acquired based on their fair values. In making estimates of fair values for purposes of allocating purchase price, the Company utilizes a number of sources, including independent appraisals that may be obtained in connection with the acquisition or financing of the respective property, our own analysis of recently acquired and existing comparable properties in our portfolio and other market data. The Company also considers information obtained about each property as a result of its pre-acquisition due diligence, marketing and leasing activities in estimating the fair value of the tangible and intangible assets acquired.
Impairment of Long-Lived Assets
The Company periodically evaluates its long-lived assets, including its investments in real estate, for indicators of impairment. The judgments regarding the existence of impairment indicators are based on factors such as operational performance, market conditions and legal and environmental concerns, as well as the Company’s ability to hold and its intent with regard to each asset. Future events could occur which would cause the Company to conclude that impairment indicators exist and an impairment loss is warranted.
Depreciation of Investment in Real Estate
The Company depreciates the building component of its investment in real estate over a 30-year estimated useful life, building improvements over a 5-year to 10-year estimated useful life and both the furniture, fixtures and equipment and replacements components over a 5-year estimated useful life, all of which are judgmental determinations.
Cost Capitalization
See the Capitalization of Fixed Assets and Improvements to Real Estate section for a discussion of the Company’s policy with respect to capitalization vs. expensing of fixed asset/repair and maintenance costs. In addition, the Company capitalizes an allocation of the payroll and associated costs of employees directly responsible for and who spend all of their time on the supervision of major capital and/or renovation projects. These costs are reflected on the balance sheet as an increase to depreciable property.
For all development projects, the Company uses its professional judgment in determining whether such costs meet the criteria for capitalization or must be expensed as incurred. The Company 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 Company 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 renovations at selected properties when additional incremental employees are hired.
Fair Value of Financial Instruments, Including Derivative Instruments
The valuation of financial instruments requires the Company to make estimates and judgments that affect the fair value of the instruments. The Company, where possible, bases the fair values of its financial instruments, including its derivative instruments, on listed market prices and third party quotes. Where these are not available, the Company bases its estimates on current instruments with similar terms and maturities or on other factors relevant to the financial instruments.
Funds From Operations and Normalized Funds From Operations
For the year ended December 31, 2010, Funds From Operations (“FFO”) available to Common Shares and Units and Normalized FFO available to Common Shares and Units increased $7.3 million, or 1.2%, and $20.9 million, or 3.2%, respectively, as compared to the year ended December 31, 2009. For the year ended December 31, 2009, FFO available to Common Shares and Units and Normalized FFO available to Common Shares and Units decreased $2.9 million, or 0.5%, and $73.5 million, or 10.0%, respectively, as compared to the year ended December 31, 2008.
The following is a reconciliation of net income to FFO available to Common Shares and Units and Normalized FFO available to Common Shares and Units for each of the five years ended December 31, 2010:
Funds From Operations and Normalized Funds From Operations
(Amounts in thousands)
(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 Company commences the conversion of apartment units to condominiums, it simultaneously discontinues depreciation of such property.
(2)
Normalized funds from operations (“Normalized FFO”) begins with FFO and excludes:
n
the impact of any expenses relating to asset impairment and valuation allowances;
n
property acquisition and other transaction costs related to mergers and acquisitions and pursuit cost write-offs (other expenses);
n
gains and losses from early debt extinguishment, including prepayment penalties, preferred share redemptions and the cost related to the implied option value of non-cash convertible debt discounts;
n
gains and losses on the sales of non-operating assets, including gains and losses from land parcel and condominium sales, net of the effect of income tax benefits or expenses; and
n
other miscellaneous non-comparable items.
(3)
The Company believes that FFO and FFO available to Common Shares and Units are helpful to investors as supplemental measures of the operating performance of a real estate company, because they are recognized measures 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 and FFO available to Common Shares and Units can help compare the operating performance of a company’s real estate between periods or as compared to different companies. The company also believes that Normalized FFO and Normalized FFO available to Common Shares and Units are helpful to investors as supplemental measures of the operating performance of a real estate company because they allow investors to compare the company’s operating performance to its performance in prior reporting periods and to the operating performance of other real estate companies without the effect of items that by their nature are not comparable from period to period and tend to obscure the Company’s actual operating results. FFO, FFO available to Common Shares and Units, Normalized FFO and Normalized FFO available to Common Shares and Units do not represent net income, net income available to Common Shares or net cash flows from operating activities in accordance with GAAP. Therefore, FFO, FFO available to Common Shares and Units, Normalized FFO and Normalized FFO available to Common Shares and Units should not be exclusively considered as alternatives to net income, net income available to Common Shares or net cash flows from operating activities as determined by GAAP or as a measure of liquidity. The Company’s calculation of FFO, FFO available to Common Shares and Units, Normalized FFO and Normalized FFO available to Common Shares and Units 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.
(4)
FFO available to Common Shares and Units and Normalized FFO available to Common Shares and Units are calculated on a basis consistent with net income available to Common Shares and reflects adjustments to net income for preferred distributions and premiums on redemption of preferred shares in accordance with accounting principles generally accepted in the United States. The equity positions of various individuals and entities that contributed their properties to the Operating Partnership in exchange for OP Units are collectively referred to as the “Noncontrolling Interests - Operating Partnership”. Subject to certain restrictions, the Noncontrolling Interests - Operating Partnership may exchange their OP Units for EQR Common Shares on a one-for-one basis.

ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Item 7A.
Quantitative and Qualitative Disclosures about Market Risk
Market risks relating to the Company’s financial instruments result primarily from changes in short-term LIBOR interest rates and changes in the SIFMA index for tax-exempt debt. The Company does not have any direct foreign exchange or other significant market risk.
The Company’s exposure to market risk for changes in interest rates relates primarily to the unsecured revolving and term credit facilities as well as floating rate tax-exempt debt. The Company typically incurs fixed rate debt obligations to finance acquisitions while it typically incurs floating rate debt obligations to finance working capital needs and as a temporary measure in advance of securing long-term fixed rate financing. The Company continuously evaluates its level of floating rate debt with respect to total debt and other factors, including its assessment of the current and future economic environment. To the extent the Company carries substantial cash balances, this will tend to partially counterbalance any increase or decrease in interest rates.
The Company also utilizes certain derivative financial instruments to manage market risk. Interest rate protection agreements are used to convert floating rate debt to a fixed rate basis or vice versa as well as to partially lock in rates on future debt issuances. Derivatives are used for hedging purposes rather than speculation. The Company does not enter into financial instruments for trading purposes. See also Note 11 to the Notes to Consolidated Financial Statements for additional discussion of derivative instruments.
The fair values of the Company’s financial instruments (including such items in the financial statement captions as cash and cash equivalents, other assets, lines of credit, accounts payable and accrued expenses and other liabilities) approximate their carrying or contract values based on their nature, terms and interest rates that approximate current market rates. The fair value of the Company’s mortgage notes payable and unsecured notes were approximately $4.7 billion and $5.5 billion, respectively, at December 31, 2010.
At December 31, 2010, the Company had total outstanding floating rate debt of approximately $1.7 billion, or 17.5% of total debt, net of the effects of any derivative instruments. If market rates of interest on all of the floating rate debt permanently increased by 14 basis points (a 10% increase from the Company’s existing weighted average interest rates), the increase in interest expense on the floating rate debt would decrease future earnings and cash flows by approximately $2.4 million. If market rates of interest on all of the floating rate debt permanently decreased by 14 basis points (a 10% decrease from the Company’s existing weighted average interest rates), the decrease in interest expense on the floating rate debt would increase future earnings and cash flows by approximately $2.4 million.
At December 31, 2010, the Company had total outstanding fixed rate debt of approximately $8.2 billion, or 82.5% of total debt, net of the effects of any derivative instruments. If market rates of interest permanently increased by 57 basis points (a 10% increase from the Company’s existing weighted average interest rates), the estimated fair value of the Company’s fixed rate debt would be approximately $7.5 billion. If market rates of interest permanently decreased by 57 basis points (a 10% decrease from the Company’s existing weighted average interest rates), the estimated fair value of the Company’s fixed rate debt would be approximately $9.1 billion.
At December 31, 2010, the Company’s derivative instruments had a net liability fair value of approximately $23.3 million. If market rates of interest permanently increased by 12 basis points (a 10% increase from the Company’s existing weighted average interest rates), the net liability fair value of the Company’s derivative instruments would be approximately $9.8 million. If market rates of interest permanently decreased by 12 basis points (a 10% decrease from the Company’s existing weighted average interest rates), the net liability fair value of the Company’s derivative instruments would be approximately $37.0 million.
At December 31, 2009, the Company had total outstanding floating rate debt of approximately $1.8 billion, or 19.7% of total debt, net of the effects of any derivative instruments. If market rates of interest on all of the floating rate debt permanently increased by 13 basis points (a 10% increase from the Company’s existing weighted average interest rates), the increase in interest expense on the floating rate debt would decrease future earnings and cash flows by approximately $2.4 million. If market rates of interest on all of the floating rate debt permanently decreased by 13 basis points (a 10% decrease from the Company’s existing weighted average interest rates), the decrease in interest expense on the floating rate debt would increase future earnings and cash flows by approximately $2.4 million.
At December 31, 2009, the Company had total outstanding fixed rate debt of approximately $7.5 billion, or 80.3% of total debt, net of the effects of any derivative instruments. If market rates of interest permanently increased by 59 basis points (a 10% increase from the Company’s existing weighted average interest rates), the estimated fair value of the Company’s fixed rate debt would be approximately $6.9 billion. If market rates of interest permanently decreased by 59 basis points (a 10% decrease from the Company’s existing weighted average interest rates), the estimated fair value of the Company’s fixed rate debt would be approximately $8.4 billion.
At December 31, 2009, the Company’s derivative instruments had a net asset fair value of approximately $25.2 million. If market rates of interest permanently increased by 20 basis points (a 10% increase from the Company’s existing weighted average interest rates), the net asset fair value of the Company’s derivative instruments would be approximately $35.5 million. If market rates of interest permanently decreased by 20 basis points (a 10% decrease from the Company’s existing weighted average interest rates), the net asset fair value of the Company’s derivative instruments would be approximately $15.9 million.
These amounts were determined by considering the impact of hypothetical interest rates on the Company’s financial instruments. The foregoing assumptions apply to the entire amount of the Company’s debt and derivative instruments and do not differentiate among maturities. These analyses do not consider the effects of the changes in overall economic activity that could exist in such an environment. Further, in the event of changes of such magnitude, management would likely take actions to further mitigate its exposure to the changes. However, due to the uncertainty of the specific actions that would be taken and their possible effects, this analysis assumes no changes in the Company’s financial structure or results.
The Company cannot predict the effect of adverse changes in interest rates on its debt and derivative instruments and, therefore, its exposure to market risk, nor can there be any assurance that long-term debt will be available at advantageous pricing. Consequently, future results may differ materially from the estimated adverse changes discussed above.

ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item 8.
Financial Statements and Supplementary Data
See Index to Consolidated Financial Statements and Schedule on page of this Form 10-K.

ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.

ITEM 9A - CONTROLS AND PROCEDURES
Item 9A.
Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures:
Effective as of December 31, 2010, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’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 to ensure that information required to be disclosed by the Company in its Exchange Act filings is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.
(b) Management’s Report on Internal Control over Financial Reporting:
Equity Residential’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Exchange Act. Under the supervision and with the participation of management, including the Company’s Chief Executive Officer and Chief Financial Officer, management conducted an evaluation of the effectiveness of internal control over financial reporting based on the framework in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can only provide reasonable assurance with respect to financial statement preparation and presentation.
Based on the Company’s evaluation under the framework in Internal Control - Integrated Framework, management concluded that its internal control over financial reporting was effective as of December 31, 2010. Our internal control over financial reporting has been audited as of December 31, 2010 by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report which is included herein.
(c) Changes in Internal Control over Financial Reporting:
There were no changes to the internal control over financial reporting of the Company identified in connection with the Company’s evaluation referred to above that occurred during the fourth quarter of 2010 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

ITEM 9B - OTHER INFORMATION

ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS

ITEM 11 - EXECUTIVE COMPENSATION

ITEM 12 - SECURITY OWNERSHIP

ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

ITEM 14 - PRINCIPAL ACCOUNTANT FEES AND SERVICES

ITEM 15 - EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
Item 15.
Exhibits and Financial Statement Schedules.
(a) The following documents are filed as part of this Report:
(1)
Financial Statements: See Index to Consolidated Financial Statements and Schedule on page of this Form 10-K.
(2)
Exhibits: See the Exhibit Index.
(3)
Financial Statement Schedules: See Index to Consolidated Financial Statements and Schedule on page of this Form 10-K.
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 its behalf by the undersigned thereunto duly authorized.
EQUITY RESIDENTIAL
By:
/s/ David J. Neithercut
David J. Neithercut, President and
Chief Executive Officer
Date: February 24, 2011
EQUITY RESIDENTIAL
ERP OPERATING LIMITED PARTNERSHIP
POWER OF ATTORNEY
KNOW ALL MEN/WOMEN BY THESE PRESENTS, that each person whose signature appears below, hereby constitutes and appoints David J. Neithercut, Mark J. Parrell and Ian S. Kaufman, or any of them, his or her attorneys-in-fact and agents, with full power of substitution and resubstitution for him or her in any and all capacities, to do all acts and things which said attorneys and agents, or any of them, deem advisable to enable the company to comply with the Securities Exchange Act of 1934, as amended, and any requirements or regulations of the Securities and Exchange Commission in respect thereof, in connection with the company’s filing of an annual report on Form 10-K for the company’s fiscal year 2010, including specifically, but without limitation of the general authority hereby granted, the power and authority to sign his or her name as a trustee or officer, or both, of the company, as indicated below opposite his or her signature, to the Form 10-K, and any amendment thereto; and each of the undersigned does hereby fully ratify and confirm all that said attorneys and agents, or any of them, or the substitute of any of them, shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities set forth below and on the dates indicated:
Name
Title
Date
/s/ David J. Neithercut
David J. Neithercut
President, Chief Executive Officer and Trustee
February 24, 2011
/s/ Mark J. Parrell
Mark J. Parrell
Executive Vice President and Chief Financial Officer
February 24, 2011
/s/ Ian S. Kaufman
Ian S. Kaufman
Senior Vice President and Chief Accounting Officer
February 24, 2011
/s/ John W. Alexander
John W. Alexander
Trustee
February 24, 2011
/s/ Charles L. Atwood
Charles L. Atwood
Trustee
February 24, 2011
/s/ Linda Walker Bynoe
Linda Walker Bynoe
Trustee
February 24, 2011
/s/ John E. Neal
John E. Neal
Trustee
February 24, 2011
/s/ Mark S. Shapiro
Mark S. Shapiro
Trustee
February 24, 2011
/s/ B. Joseph White
B. Joseph White
Trustee
February 24, 2011
/s/ Gerald A. Spector
Gerald A. Spector
Vice Chairman of the Board of Trustees
February 24, 2011
/s/ Samuel Zell
Samuel Zell
Chairman of the Board of Trustees
February 24, 2011
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
EQUITY RESIDENTIAL
PAGE
FINANCIAL STATEMENTS FILED AS PART OF THIS REPORT
Report of Independent Registered Public Accounting Firm
Report of Independent Registered Public Accounting Firm
on Internal Control Over Financial Reporting
Consolidated Balance Sheets as of December 31, 2010 and 2009
Consolidated Statements of Operations for the years ended
December 31, 2010, 2009 and 2008
to
Consolidated Statements of Cash Flows for the years ended
December 31, 2010, 2009 and 2008
to
Consolidated Statements of Changes in Equity for the years ended
December 31, 2010, 2009 and 2008
to
Notes to Consolidated Financial Statements
to
SCHEDULE FILED AS PART OF THIS REPORT
Schedule III - Real Estate and Accumulated Depreciation
S-1 to S-14
All other schedules have been omitted because they are inapplicable, not required or the information is included elsewhere in the consolidated financial statements or notes thereto.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees and Shareholders
Equity Residential
We have audited the accompanying consolidated balance sheets of Equity Residential (the “Company”) as of December 31, 2010 and 2009 and the related consolidated statements of operations, changes in equity and cash flows for each of the three years in the period ended December 31, 2010. Our audits also included the financial statement schedule listed in the accompanying index to the consolidated financial statements and schedule. These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Equity Residential at December 31, 2010 and 2009 and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2010, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Equity Residential’s internal control over financial reporting as of December 31, 2010, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 24, 2011 expressed an unqualified opinion thereon.
/s/ ERNST & YOUNG LLP
ERNST & YOUNG LLP
Chicago, Illinois
February 24, 2011
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
ON INTERNAL CONTROL OVER FINANCIAL REPORTING
To the Board of Trustees and Shareholders
Equity Residential
We have audited Equity Residential’s (the “Company”) internal control over financial reporting as of December 31, 2010, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO Criteria”). Equity Residential’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, Equity Residential maintained, in all material respects, effective internal control over financial reporting as of December 31, 2010, based on the COSO Criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Equity Residential as of December 31, 2010 and 2009 and the related consolidated statements of operations, changes in equity and cash flows for each of the three years in the period ended December 31, 2010 of Equity Residential and our report dated February 24, 2011, expressed an unqualified opinion thereon.
/s/ ERNST & YOUNG LLP
ERNST & YOUNG LLP
Chicago, Illinois
February 24, 2011
EQUITY RESIDENTIAL
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands except for share amounts)
See accompanying notes
EQUITY RESIDENTIAL
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands except per share data)
See accompanying notes
EQUITY RESIDENTIAL
CONSOLIDATED STATEMENTS OF OPERATIONS (Continued)
(Amounts in thousands except per share data)
Year Ended December 31,
Comprehensive income:
Net income
$
295,983
$
382,029
$
436,413
Other comprehensive (loss) income - derivative instruments:
Unrealized holding (losses) gains arising during the year
(65,894
)
37,676
(23,815
)
Losses reclassified into earnings from other comprehensive income
3,338
3,724
2,696
Other
-
-
Other comprehensive income (loss) - other instruments:
Unrealized holding gains arising during the year
3,574
1,202
(Gains) realized during the year
-
(4,943
)
-
Comprehensive income
233,484
422,509
416,496
Comprehensive (income) attributable to Noncontrolling Interests
(12,373
)
(19,756
)
(28,791
)
Comprehensive income attributable to controlling interests
$
221,111
$
402,753
$
387,705
See accompanying notes
EQUITY RESIDENTIAL
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
See accompanying notes
EQUITY RESIDENTIAL
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Amounts in thousands)
See accompanying notes
EQUITY RESIDENTIAL
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Amounts in thousands)
See accompanying notes
EQUITY RESIDENTIAL
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Amounts in thousands)
See accompanying notes
EQUITY RESIDENTIAL
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Continued)
(Amounts in thousands)
See accompanying notes
EQUITY RESIDENTIAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1.
Business
Equity Residential (“EQR”), a Maryland real estate investment trust (“REIT”) formed in March 1993, is an S&P 500 company focused on the acquisition, development and management of high quality apartment properties in top United States growth markets. EQR has elected to be taxed as a REIT.
EQR is the general partner of, and as of December 31, 2010 owned an approximate 95.5% ownership interest in, ERP Operating Limited Partnership, an Illinois limited partnership (the “Operating Partnership”). The Company is structured as an umbrella partnership REIT (“UPREIT”) under which all property ownership and related business operations are conducted through the Operating Partnership and its subsidiaries. References to the “Company” include EQR, the Operating Partnership and those entities owned or controlled by the Operating Partnership and/or EQR.
As of December 31, 2010, the Company, directly or indirectly through investments in title holding entities, owned all or a portion of 451 properties located in 17 states and the District of Columbia consisting of 129,604 apartment units. The ownership breakdown includes (table does not include various uncompleted development properties):
The “Wholly Owned Properties” are accounted for under the consolidation method of accounting. The Company beneficially owns 100% fee simple title to 422 of the 425 Wholly Owned Properties and all but one of its wholly owned development properties and land parcels. The Company owns the building and improvements and leases the land underlying the improvements under long-term ground leases that expire in 2026, 2077 and 2101 for the three operating properties, respectively, and 2104 for one land parcel. These properties are consolidated and reflected as real estate assets while the ground leases are accounted for as operating leases.
The “Partially Owned Properties - Consolidated” are controlled by the Company but have partners with noncontrolling interests and are accounted for under the consolidation method of accounting. The “Military Housing” properties consist of investments in limited liability companies that, as a result of the terms of the operating agreements, are accounted for as management contract rights with all fees recognized as fee and asset management revenue.
2.
Summary of Significant Accounting Policies
Basis of Presentation
Due to the Company’s ability as general partner to control either through ownership or by contract the Operating Partnership and its subsidiaries, the Operating Partnership and each such subsidiary has been consolidated with the Company for financial reporting purposes, except for an unconsolidated development land parcel and our military housing properties. The consolidated financial statements also include all variable interest entities for which the Company is the primary beneficiary.
Real Estate Assets and Depreciation of Investment in Real Estate
Effective for business combinations on or after January 1, 2009, an acquiring entity is required to recognize all assets acquired and liabilities assumed in a transaction at the acquisition-date fair value with limited exceptions. In addition, an acquiring entity is required to expense acquisition-related costs as incurred (amounts are included in the other expenses line item in the consolidated statements of operations), value noncontrolling interests at fair value at the acquisition date and expense restructuring costs associated with an acquired business.
The Company allocates the purchase price of properties to net tangible and identified intangible assets acquired based on their fair values. In making estimates of fair values for purposes of allocating purchase price, the Company utilizes a number of sources, including independent appraisals that may be obtained in connection with the acquisition or financing of the respective property, our own analysis of recently acquired and existing comparable properties in our portfolio and other market data. The Company also considers information obtained about each property as a result of its pre-acquisition due diligence, marketing and
leasing activities in estimating the fair value of the tangible and intangible assets acquired. The Company allocates the purchase price of acquired real estate to various components as follows:
n
Land - Based on actual purchase price if acquired separately or market research/comparables if acquired with an operating property.
n
Furniture, Fixtures and Equipment - Ranges between $8,000 and $13,000 per apartment unit acquired as an estimate of the fair value of the appliances and fixtures inside an apartment unit. The per-apartment unit amount applied depends on the type of apartment building acquired. Depreciation is calculated on the straight-line method over an estimated useful life of five years.
n
In-Place Leases - The Company considers the value of acquired in-place leases and the amortization period is the average remaining term of each respective in-place acquired lease.
n
Other Intangible Assets - The Company considers whether it has acquired other intangible assets, including any customer relationship intangibles and the amortization period is the estimated useful life of the acquired intangible asset.
n
Building - Based on the fair value determined on an “as-if vacant” basis. Depreciation is calculated on the straight-line method over an estimated useful life of thirty years.
Replacements inside an apartment unit such as appliances and carpeting are depreciated over a five-year estimated useful life. Expenditures for ordinary maintenance and repairs are expensed to operations as incurred and significant renovations and improvements that improve and/or extend the useful life of the asset are capitalized over their estimated useful life, generally five to ten years. Initial direct leasing costs are expensed as incurred as such expense approximates the deferral and amortization of initial direct leasing costs over the lease terms. Property sales or dispositions are recorded when title transfers to unrelated third parties, contingencies have been removed and sufficient cash consideration has been received by the Company. Upon disposition, the related costs and accumulated depreciation are removed from the respective accounts. Any gain or loss on sale is recognized in accordance with accounting principles generally accepted in the United States.
The Company classifies real estate assets as real estate held for disposition when it is certain a property will be disposed of (see further discussion below).
The Company classifies properties under development and/or expansion and properties in the lease-up phase (including land) as construction-in-progress until construction has been completed and all certificates of occupancy permits have been obtained.
Impairment of Long-Lived Assets
The Company periodically evaluates its long-lived assets, including its investments in real estate, for indicators of impairment. The judgments regarding the existence of impairment indicators are based on factors such as operational performance, market conditions and legal and environmental concerns, as well as the Company’s ability to hold and its intent with regard to each asset. Future events could occur which would cause the Company to conclude that impairment indicators exist and an impairment loss is warranted.
For long-lived assets to be held and used, the Company compares the expected future undiscounted cash flows for the long-lived asset against the carrying amount of that asset. If the sum of the estimated undiscounted cash flows is less than the carrying amount of the asset, the Company would record an impairment loss for the difference between the estimated fair value and the carrying amount of the asset.
For long-lived assets to be disposed of, an impairment loss is recognized when the estimated fair value of the asset, less the estimated cost to sell, is less than the carrying amount of the asset measured at the time that the Company has determined it will sell the asset. Long-lived assets held for disposition and the related liabilities are separately reported, with the long-lived assets reported at the lower of their carrying amounts or their estimated fair values, less their costs to sell, and are not depreciated after reclassification to real estate held for disposition.
Cost Capitalization
See the Real Estate Assets and Depreciation of Investment in Real Estate section for a discussion of the Company’s policy with respect to capitalization vs. expensing of fixed asset/repair and maintenance costs. In addition, the Company capitalizes an allocation of the payroll and associated costs of employees directly responsible for and who spend all of their time on the
supervision of major capital and/or renovation projects. These costs are reflected on the balance sheet as an increase to depreciable property.
For all development projects, the Company uses its professional judgment in determining whether such costs meet the criteria for capitalization or must be expensed as incurred. The Company 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 Company 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 renovations at selected properties when additional incremental employees are hired.
Cash and Cash Equivalents
The Company considers all demand deposits, money market accounts and investments in certificates of deposit and repurchase agreements purchased with a maturity of three months or less at the date of purchase to be cash equivalents. The Company maintains its cash and cash equivalents at financial institutions. The combined account balances at one or more institutions typically exceed the Federal Depository Insurance Corporation (“FDIC”) insurance coverage, and, as a result, there is a concentration of credit risk related to amounts on deposit in excess of FDIC insurance coverage. The Company believes that the risk is not significant, as the Company does not anticipate the financial institutions’ non-performance.
Investment Securities
Investment securities are included in other assets in the consolidated balance sheets. These securities are classified as held-to-maturity and carried at amortized cost if management has the positive intent and ability to hold the securities to maturity. Otherwise, the securities are classified as available-for-sale and carried at estimated fair value with unrealized gains and losses included in accumulated other comprehensive (loss) income, a separate component of shareholders’ equity.
Deferred Financing Costs
Deferred financing costs include fees and costs incurred to obtain the Company’s lines of credit and long-term financings. These costs are amortized over the terms of the related debt. Unamortized financing costs are written off when debt is retired before the maturity date. The accumulated amortization of such deferred financing costs was $43.9 million and $34.6 million at December 31, 2010 and 2009, respectively.
Fair Value of Financial Instruments, Including Derivative Instruments
The valuation of financial instruments requires the Company to make estimates and judgments that affect the fair value of the instruments. The Company, where possible, bases the fair values of its financial instruments, including its derivative instruments, on listed market prices and third party quotes. Where these are not available, the Company bases its estimates on current instruments with similar terms and maturities or on other factors relevant to the financial instruments.
In the normal course of business, the Company is exposed to the effect of interest rate changes. The Company seeks to manage these risks by following established risk management policies and procedures including the use of derivatives to hedge interest rate risk on debt instruments.
The Company 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 Company has not sustained a material loss from these instruments nor does it anticipate any material adverse effect on its net income or financial position in the future from the use of derivatives.
The Company recognizes all derivatives as either assets or liabilities in the consolidated balance sheets and measures those instruments at fair value. In addition, fair value adjustments will affect either shareholders’ equity or net income depending on whether the derivative instruments qualify as a hedge for accounting purposes and, if so, the nature of the hedging activity. When the terms of an underlying transaction are modified, or when the underlying transaction is terminated or completed, all changes in the fair value of the instrument are marked-to-market with changes in value included in net income each period until the instrument matures. Any derivative instrument used for risk management that does not meet the hedging criteria is marked-to-market each period. The Company does not use derivatives for trading or speculative purposes.
Revenue Recognition
Rental income attributable to residential leases is recorded on a straight-line basis, which is not materially different than if it were recorded when due from residents and recognized monthly as it was earned. 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.
Share-Based Compensation
The Company expenses share-based compensation such as restricted shares and share options. The fair value of the option grants are recognized over the vesting period of the options. The fair value for the Company’s share options was estimated at the time the share options were granted using the Black-Scholes option pricing model with the following weighted average assumptions:
(1)
Expected volatility - Estimated based on the historical volatility of EQR’s share price, on a monthly basis, for a period matching the expected life of each grant.
(2)
Expected life - Approximates the actual weighted average life of all share options granted since the Company went public in 1993.
(3)
Expected dividend yield - Calculated by averaging the historical annual yield on EQR shares for a period matching the expected life of each grant, with the annual yield calculated by dividing actual dividends by the average price of EQR’s shares in a given year.
(4)
Risk-free interest rate - The most current U.S. Treasury rate available prior to the grant date for a period matching the expected life of each grant.
The valuation method and assumptions are the same as those the Company used in accounting for option expense in its consolidated financial statements. The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. This model is only one method of valuing options and the Company’s use of this model should not be interpreted as an endorsement of its accuracy. Because the Company’s share options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its share options and the actual value of the options may be significantly different.
Income and Other Taxes
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. Historically, the Company has generally only incurred certain state and local income, excise and franchise taxes. The Company has elected Taxable REIT Subsidiary (“TRS”) status for certain of its corporate subsidiaries, primarily those entities engaged in condominium conversion and corporate housing activities and as a result, these entities will incur both federal and state income taxes on any taxable income of such entities after consideration of any net operating losses.
Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. These assets and liabilities are measured using enacted tax rates for which the temporary differences are expected to be recovered or settled. The effects of changes in tax rates on deferred tax assets and liabilities are recognized in earnings in the period enacted. The Company’s deferred tax assets are generally the result of tax affected amortization of goodwill, differing depreciable lives on capitalized assets and the timing of expense recognition for certain accrued liabilities. As of December 31, 2010, the Company has recorded a deferred tax asset of approximately $38.7 million, which is fully offset by a valuation allowance due to the uncertainty in forecasting future TRS taxable income.
The Company provided for income, franchise and excise taxes allocated as follows in the consolidated statements of operations for the years ended December 31, 2010, 2009 and 2008 (amounts in thousands):
(1)
Primarily includes state and local income, excise and franchise taxes.
(2)
Primarily represents federal income taxes (recovered) on the gains on sales of condominium units owned by a TRS and included in discontinued operations. Also represents state and local income, excise and franchise taxes on operating properties sold and included in discontinued operations.
(3)
All provisions for income tax amounts are current and none are deferred.
The Company’s TRSs carried back approximately $7.3 million of 2008 net operating losses (“NOL”) to 2006. The remaining NOL from the 2008 tax year, as well as the NOLs generated in 2009 and 2010, are available for carryforward to future tax years. The Company’s TRSs have approximately $59.3 million of NOL carryforwards available as of January 1, 2011 that will expire in 2028, 2029 and 2030.
During the years ended December 31, 2010, 2009 and 2008, the Company’s tax treatment of dividends and distributions were as follows:
The cost of land and depreciable property, net of accumulated depreciation, for federal income tax purposes as of December 31, 2010 and 2009 was approximately $11.1 billion and $10.4 billion, respectively.
Noncontrolling Interests
A noncontrolling interest in a subsidiary (minority interest) is in most cases an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements and separate from the parent company’s equity. In addition, consolidated net income is required to be reported at amounts that include the amounts attributable to both the parent and the noncontrolling interest and the amount of consolidated net income attributable to the parent and the noncontrolling interest are required to be disclosed on the face of the Consolidated Statements of Operations. See Note 3 for further discussion.
Operating Partnership: Net income is allocated to noncontrolling interests based on their respective ownership percentage of the Operating Partnership. The ownership percentage is calculated by dividing the number of units of limited partnership interest (“OP Units”) held by the noncontrolling interests by the total OP Units held by the noncontrolling interests and EQR. Issuance of additional common shares of beneficial interest, $0.01 par value per share (the “Common Shares”), and OP Units changes the ownership interests of both the noncontrolling interests and EQR. Such transactions and the related proceeds are treated as capital transactions.
Partially Owned Properties: The Company reflects noncontrolling interests in partially owned properties on the balance sheet for the portion of properties consolidated by the Company that are not wholly owned by the Company. The earnings or losses from those properties attributable to the noncontrolling interests are reflected as noncontrolling interests in partially owned properties in the consolidated statements of operations.
Redeemable Noncontrolling Interests - Operating Partnership: The Company classifies Redeemable Noncontrolling Interests - Operating Partnership in the mezzanine section of the consolidated balance sheets for the portion of OP Units that the Company is required, either by contract or securities law, to deliver registered EQR Common Shares to the exchanging OP Unit
holder. The redeemable noncontrolling interest units are adjusted to the greater of carrying value or fair market value based on the Common Share price of EQR at the end of each respective reporting period.
Use of Estimates
In preparation of the Company’s financial statements in conformity with accounting principles generally accepted in the United States, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.
Reclassifications
Certain reclassifications considered necessary for a fair presentation have been made to the prior period financial statements in order to conform to the current year presentation. These reclassifications have not changed the results of operations or equity.
Other
In June 2009, the Financial Accounting Standards Board (“FASB”) issued The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles, which superseded all then-existing non-SEC accounting and reporting standards and became the source of authoritative U.S. generally accepted accounting principles recognized by the FASB to be applied by non-governmental entities. The Company adopted the codification as required, effective for the quarter ended September 30, 2009. The adoption of the codification has no impact on the Company’s consolidated results of operations or financial position but changed the way we refer to accounting literature in our reports.
Effective January 1, 2010, in an effort to improve financial standards for transfers of financial assets, more stringent conditions for reporting a transfer of a portion of a financial asset as a sale (e.g. loan participations) are required, the concept of a “qualifying special-purpose entity” and special guidance for guaranteed mortgage securitizations are eliminated, other sale-accounting criteria is clarified and the initial measurement of a transferor’s interest in transferred financial assets is changed. This does not have a material effect on the Company’s consolidated results of operations or financial position.
Effective January 1, 2010, the analysis for identifying the primary beneficiary of a Variable Interest Entity (“VIE”) has been simplified by replacing the previous quantitative-based analysis with a framework that is based more on qualitative judgments. The analysis requires the primary beneficiary of a VIE to be identified as the party that both (a) has the power to direct the activities of a VIE that most significantly impact its economic performance and (b) has an obligation to absorb losses or a right to receive benefits that could potentially be significant to the VIE. For the Company, this includes its consolidated development partnerships as the Company provides substantially all of the capital for these ventures (other than third party mortgage debt, if any). For the Company, these requirements affected only disclosures and had no impact on the Company’s consolidated results of operations or financial position. See Note 6 for further discussion.
The Company is required to make certain disclosures regarding noncontrolling interests in consolidated limited-life subsidiaries. The Company is the controlling partner in various consolidated partnerships owning 24 properties and 5,232 apartment units and various completed and uncompleted development properties having a noncontrolling interest book value of $8.0 million at December 31, 2010. Some of these partnership agreements contain provisions that require the partnerships to be liquidated through the sale of their assets upon reaching a date specified in each respective partnership agreement. The Company, as controlling partner, has an obligation to cause the property owning partnerships to distribute the proceeds of liquidation to the Noncontrolling Interests in these Partially Owned Properties only to the extent that the net proceeds received by the partnerships from the sale of their assets warrant a distribution based on the partnership agreements. As of December 31, 2010, the Company estimates the value of Noncontrolling Interest distributions would have been approximately $53.0 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 December 31, 2010 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 Noncontrolling Interests in the Company’s Partially Owned Properties is subject to change. To the extent that the partnerships’ underlying assets are worth less than the underlying liabilities, the Company has no obligation to remit any consideration to the Noncontrolling Interests in these Partially Owned Properties.
Effective beginning the quarter ended June 30, 2009, disclosures about fair value of financial instruments are required for interim reporting periods in summarized financial information for publicly traded companies as well as in annual financial
statements. This does not have a material effect on the Company’s consolidated results of operations or financial position. See Note 11 for further discussion.
Effective January 1, 2010, companies are required to separately disclose the amounts of significant transfers of assets and liabilities into and out of Level 1, Level 2 and Level 3 of the fair value hierarchy and the reasons for those transfers. Companies must also develop and disclose their policy for determining when transfers between levels are recognized. In addition, companies are required to provide fair value disclosures for each class rather than each major category of assets and liabilities. For fair value measurements using significant other observable inputs (Level 2) or significant unobservable inputs (Level 3), companies are required to disclose the valuation technique and the inputs used in determining fair value for each class of assets and liabilities. This does not have a material effect on the Company’s consolidated results of operations or financial position. See Note 11 for further discussion.
Effective January 1, 2011, companies will be required to separately disclose purchases, sales, issuances and settlements on a gross basis in the reconciliation of recurring Level 3 fair value measurements. The Company does not expect this will have a material effect on its consolidated results of operations or financial position.
Effective January 1, 2009, in an effort to improve financial standards for derivative instruments and hedging activities, companies are required to enhance disclosures to enable investors to better understand their effects on an entity’s financial position, financial performance and cash flows. Among other requirements, entities are required to provide enhanced disclosures about: (1) how and why an entity uses derivative instruments; (2) how derivative instruments and related hedged items are accounted for; and (3) how derivative instruments and related hedged items affect an entity’s financial position, financial performance and cash flows. Other than the enhanced disclosure requirements, this does not have a material effect on the Company’s consolidated financial statements. See Note 11 for further discussion.
Effective January 1, 2009, issuers of certain convertible debt instruments that may be settled in cash on conversion were required to separately account for the liability and equity components of the instrument in a manner that reflects each issuer’s nonconvertible debt borrowing rate. As the Company is required to apply this retrospectively, the accounting for the Operating Partnership’s $650.0 million ($482.5 million outstanding at December 31, 2010) 3.85% convertible unsecured notes that were issued in August 2006 and mature in August 2026 was affected. The Company recognized $18.6 million, $20.6 million and $24.4 million in interest expense related to the stated coupon rate of 3.85% for the years ended December 31, 2010, 2009 and 2008, respectively. The amount of the conversion option as of the date of issuance calculated by the Company using a 5.80% effective interest rate was $44.3 million and is being amortized to interest expense over the expected life of the convertible notes (through the first put date on August 18, 2011). Total amortization of the cash discount and conversion option discount on the unsecured notes resulted in a reduction to earnings of approximately $7.8 million and $10.6 million, respectively, or $0.03 per share and $0.04 per share, respectively, for the years ended December 31, 2010 and 2009, and is anticipated to result in a reduction to earnings of approximately $5.0 million or $0.02 per share for the year ended December 31, 2011. In addition, the Company decreased the January 1, 2009 balance of retained earnings by $27.0 million, decreased the January 1, 2009 balance of notes by $17.3 million and increased the January 1, 2009 balance of paid in capital by $44.3 million. Due to the required retrospective application, it resulted in a reduction to earnings of approximately $13.3 million or $0.05 per share for the year ended December 31, 2008. The carrying amount of the conversion option remaining in paid in capital was $44.3 million at both December 31, 2010 and 2009. The unamortized cash and conversion option discounts totaled $5.0 million and $12.8 million at December 31, 2010 and 2009, respectively.
3.
Equity and Redeemable Noncontrolling Interests
The following tables present the changes in the Company’s issued and outstanding Common Shares and “Units” (which includes OP Units and Long-Term Incentive Plan (“LTIP”) Units) for the years ended December 31, 2010, 2009 and 2008:
An unlimited amount of equity and debt securities remains available for issuance by the Company and the Operating Partnership under effective shelf registration statements filed with the SEC. Most recently, the Company and the Operating Partnership filed a universal shelf registration statement for an unlimited amount of equity and debt securities that became automatically effective upon filing with the SEC in October 2010 (under SEC regulations enacted in 2005, the registration statement automatically expires on October 14, 2013 and does not contain a maximum issuance amount).
In September 2009, the Company announced the establishment of an At-The-Market (“ATM”) share offering program which would allow the Company to sell up to 17.0 million Common Shares from time to time over the next three years into the existing trading market at current market prices as well as through negotiated transactions. During the year ended December 31, 2010, the Company issued approximately 6.2 million Common Shares at an average price of $47.45 per share for total consideration of approximately $291.9 million through the ATM program. During the year ended December 31, 2009, the Company issued approximately 3.5 million Common Shares at an average price of $35.38 per share for total consideration of approximately $123.7 million through the ATM program. As of December 31, 2009, transactions to issue approximately 1.1 million of the 3.5 million Common Shares had not yet settled. As of December 31, 2009, the Company increased the number of Common Shares issued and outstanding by this amount and recorded a receivable of approximately $37.6 million included in other assets on the consolidated balance sheets. See Note 20 for further discussion on shares available under this program.
EQR has a share repurchase program authorized by the Board of Trustees. Considering the repurchase activity for the year ended December 31, 2010, EQR has remaining authorization to repurchase an additional $464.6 million of its shares as of December 31, 2010.
During the year ended December 31, 2010, the Company repurchased 58,130 of its Common Shares at an average price of $32.46 per share for total consideration of $1.9 million. These shares were retired subsequent to the repurchases. All of the shares repurchased during the year ended December 31, 2010 were repurchased from employees at the then current market prices to cover the minimum statutory tax withholding obligations related to the vesting of employees’ restricted shares.
During the year ended December 31, 2009, the Company repurchased 47,450 of its Common Shares at an average price of $23.69 per share for total consideration of $1.1 million. These shares were retired subsequent to the repurchases. All of the shares repurchased during the year ended December 31, 2009 were repurchased from employees at the then current market prices to cover the minimum statutory tax withholding obligations related to the vesting of employees’ restricted shares.
During the year ended December 31, 2008, the Company repurchased 220,085 of its Common Shares at an average price of $35.93 per share for total consideration of $7.9 million. These shares were retired subsequent to the repurchases. Of the total shares repurchased, 120,085 shares were repurchased from employees at an average price of $36.10 per share (the average of the then current market prices) to cover the minimum statutory tax withholding obligations related to the vesting of employees’ restricted shares. The remaining 100,000 shares were repurchased in the open market at an average price of $35.74 per share.
The equity positions of various individuals and entities that contributed their properties to the Operating Partnership in exchange for OP Units, as well as the equity positions of the holders of LTIP Units, are collectively referred to as the “Noncontrolling Interests - Operating Partnership”. Subject to certain exceptions (including the “book-up” requirements of LTIP Units), the Noncontrolling Interests - Operating Partnership may exchange their Units with EQR for Common Shares on a one-for-one basis. The carrying value of the Noncontrolling Interests - Operating Partnership (including redeemable interests) is allocated based on the number of Noncontrolling Interests - Operating Partnership Units in total in proportion to the number of Noncontrolling Interests - Operating Partnership Units in total plus the number of EQR Common Shares. Net income is allocated to the Noncontrolling Interests - Operating Partnership based on the weighted average ownership percentage during the period.
The Operating Partnership has the right but not the obligation to make a cash payment instead of issuing Common Shares to any and all holders of Noncontrolling Interests - Operating Partnership Units requesting an exchange of their OP Units with EQR. Once the Operating Partnership elects not to redeem the Noncontrolling Interests - Operating Partnership Units for cash, EQR is obligated to deliver Common Shares to the exchanging holder of the Noncontrolling Interests - Operating Partnership Units.
The Noncontrolling Interests - Operating Partnership Units are classified as either mezzanine equity or permanent equity. If EQR is required, either by contract or securities law, to deliver registered Common Shares, such Noncontrolling Interests - Operating Partnership are differentiated and referred to as “Redeemable Noncontrolling Interests - Operating Partnership”. Instruments that require settlement in registered shares can not be classified in permanent equity as it is not always completely within an issuer’s control to deliver registered shares. Therefore, settlement in cash is assumed and that responsibility for settlement in cash is deemed to fall to the Operating Partnership as the primary source of cash for EQR, resulting in presentation in the mezzanine section of the balance sheet. The Redeemable Noncontrolling Interests - Operating Partnership are adjusted to the greater of carrying value or fair market value based on the Common Share price of EQR at the end of each respective reporting period. EQR has the ability to deliver unregistered Common Shares for the remaining portion of the Noncontrolling Interests - Operating Partnership Units that are classified in permanent equity at December 31, 2010 and 2009.
The carrying value of the Redeemable Noncontrolling Interests - Operating Partnership is allocated based on the number of Redeemable Noncontrolling Interests - Operating Partnership Units in proportion to the number of Noncontrolling Interests - Operating Partnership Units in total. Such percentage of the total carrying value of Units which is ascribed to the Redeemable Noncontrolling Interests - Operating Partnership is then adjusted to the greater of carrying value or fair market value as described above. As of December 31, 2010, the Redeemable Noncontrolling Interests - Operating Partnership have a redemption value of approximately $383.5 million, which represents the value of Common Shares that would be issued in exchange with the Redeemable Noncontrolling Interests - Operating Partnership Units.
The following table presents the changes in the redemption value of the Redeemable Noncontrolling Interests - Operating Partnership for the years ended December 31, 2010, 2009 and 2008, respectively (amounts in thousands):
Net proceeds from the Company’s Common Share and Preferred Share (see definition below) offerings are contributed by the Company to the Operating Partnership. In return for those contributions, EQR receives a number of OP Units in the Operating Partnership 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 the Operating Partnership equal in number and having the same terms as the Preferred Shares issued in the equity offering). As a result, the net offering proceeds from Common Shares and Preferred Shares are allocated between shareholders’ equity and Noncontrolling Interests - Operating Partnership to account for the change in their respective percentage ownership of the underlying equity of the Operating Partnership.
The Company’s declaration of trust authorizes the Company to issue up to 100,000,000 preferred shares of beneficial interest, $0.01 par value per share (the “Preferred Shares”), with specific rights, preferences and other attributes as the Board of Trustees may determine, which may include preferences, powers and rights that are senior to the rights of holders of the Company’s Common Shares.
The following table presents the Company’s issued and outstanding Preferred Shares as of December 31, 2010 and 2009:
(1)
On or after the redemption date, redeemable preferred shares (Series K and N) may be redeemed for cash at the option of the Company, in whole or in part, at a redemption price equal to the liquidation price per share, plus accrued and unpaid distributions, if any.
(2)
On or after the redemption date, convertible preferred shares (Series E and H) may be redeemed under certain circumstances at the option of the Company for cash (in the case of Series E) or Common Shares (in the case of Series H), in whole or in part, at various redemption prices per share based upon the contractual conversion rate, plus accrued and unpaid distributions, if any. On November 1, 2010, the Company redeemed its Series E and Series H Cumulative Convertible Preferred Shares for cash consideration of $0.8 million and 355,539 Common Shares.
(3)
Dividends on all series of Preferred Shares are payable quarterly at various pay dates. The dividend listed for Series N is a Preferred Share rate and the equivalent Depositary Share annual dividend is $1.62 per share.
(4)
The Series N Preferred Shares have a corresponding depositary share that consists of ten times the number of shares and one-tenth the liquidation value and dividend per share.
On July 30, 2009, the Operating Partnership elected to convert all 7,367 Series B Junior Convertible Preference Units into 7,517 OP Units. The actual preference unit dividends declared for the period outstanding in 2009 was $1.17 per unit.
On March 31, 2010, the Operating Partnership issued 188,571 OP Units at a price of $39.15 per OP Unit for total valuation of $7.4 million as partial consideration for the acquisition of one rental property. As the value of the OP Units issued was agreed by contract to be $35.00 per OP Unit, the difference between the contracted value and fair value (the closing price of Common Shares on the closing date) was recorded as an increase to the purchase price.
During the year ended December 31, 2010, the Company acquired all of its partner’s interest in two consolidated partially owned properties consisting of 432 apartment units, one consolidated partially owned development project and one consolidated partially owned land parcel for $0.7 million. One of these partially owned property buyouts was funded through the issuance of 1,129 OP Units valued at $50,000. The Company also increased its ownership in three consolidated partially owned properties through the buyout of certain equity interests which were funded through the issuance of 15,948 OP Units valued at $0.8 million and cash payments of $15.3 million. In conjunction with these transactions, the Company reduced paid in capital by $16.9 million and other liabilities by $0.2 million and increased Noncontrolling Interests - Partially Owned Properties by $0.2 million.
During the year ended December 31, 2009, the Company acquired all of its partners’ interests in five consolidated partially owned properties consisting of 1,587 apartment units for $9.2 million. In addition, the Company also acquired a portion of the outside partner interests in two consolidated partially owned properties, one funded using cash of $2.1 million and the other funded through the issuance of 32,061 OP Units valued at $0.8 million. In conjunction with these transactions, the Company reduced paid in capital by $1.5 million and Noncontrolling Interests - Partially Owned Properties by $11.7 million.
During the year ended December 31, 2008, the Company acquired all of its partners’ interests in one consolidated partially owned property consisting of 144 apartment units for $5.9 million and three consolidated partially owned land parcels for $1.6 million. In addition, the Company made an additional payment of $1.3 million related to an April 2006 acquisition of a partner’s interest in a now wholly owned property, partially funded through the issuance of 19,017 OP Units valued at $0.8 million.
4.
Real Estate
The following table summarizes the carrying amounts for the Company’s investment in real estate (at cost) as of December 31, 2010 and 2009 (amounts in thousands):
During the year ended December 31, 2010, the Company acquired the entire equity interest in the following from unaffiliated parties (purchase price in thousands):
In addition to the properties discussed above, the Company acquired the 75% equity interest it did not own in seven previously unconsolidated properties containing 1,811 apartment units with a real estate value of $105.1 million.
During the year ended December 31, 2009, the Company acquired the entire equity interest in the following from unaffiliated parties (purchase price in thousands):
The Company also acquired the 75% equity interest in one previously unconsolidated property it did not already own consisting of 250 apartment units for a gross sales price of $18.5 million from its institutional joint venture partner.
During the year ended December 31, 2010, the Company disposed of the following to unaffiliated parties (sales price in thousands):
(1)
The Company owned a 25% interest in these unconsolidated rental properties. Sales price listed is the gross sales price.
The Company recognized a net gain on sales of discontinued operations of approximately $298.0 million, a net gain on sales of unconsolidated entities of approximately $28.1 million and a net loss on sales of land parcels of approximately $1.4 million on the above sales.
During the year ended December 31, 2009, the Company disposed of the following to unaffiliated parties (sales price in thousands):
(1)
The Company owned a 25% interest in these unconsolidated rental properties. Sales price listed is the gross sales price. The Company’s buyout of its partner’s interest in one previously unconsolidated property is not included in the above totals.
The Company recognized a net gain on sales of discontinued operations of approximately $335.3 million and a net gain on sales of unconsolidated entities of approximately $10.7 million on the above sales.
5.
Commitments to Acquire/Dispose of Real Estate
In addition to the properties that were subsequently acquired as discussed in Note 20, the Company had entered into separate agreements to acquire the following (purchase price in thousands):
Properties
Apartment Units
Purchase Price
Rental Properties
$
125,250
Total
$
125,250
In addition to the properties that were subsequently disposed of as discussed in Note 20, the Company had entered into separate agreements to dispose of the following (sales price in thousands):
Properties
Apartment Units
Sales Price
Rental Properties
4,152
$
378,650
Total
4,152
$
378,650
The closings of these pending transactions are subject to certain conditions and restrictions, therefore, there can be no assurance that these transactions will be consummated or that the final terms will not differ in material respects from those summarized in the preceding paragraphs.
6.
Investments in Partially Owned Entities
The Company has co-invested in various properties with unrelated third parties which are either consolidated or accounted for under the equity method of accounting (unconsolidated). The following tables and information summarize the Company’s investments in partially owned entities as of December 31, 2010 (amounts in thousands except for project and apartment unit amounts):
(1)
Project and apartment unit counts exclude all uncompleted development projects until those projects are substantially completed.
(2)
All debt is non-recourse to the Company with the exception of $14.0 million in mortgage debt on one development project.
(3)
Represents the Company’s current economic ownership interest.
(4)
Projects included here are substantially complete. However, they may still require additional exterior and interior work for all apartment units to be available for leasing.
During the year ended December 31, 2010, the Company acquired the 75% equity interest it did not own in seven previously unconsolidated properties containing 1,811 apartment units in exchange for an approximate $30.0 million payment to its partner. In addition, the Company repaid the net $70.0 million mortgage loan, which was to mature on May 1, 2010, concurrent with closing using proceeds drawn from the Company’s line of credit. The Company also sold its 25% equity interest in the remaining 24 unconsolidated properties containing 5,635 apartment units in exchange for an approximate $25.4 million payment from its partner and the related $264.8 million in non-recourse mortgage debt was extinguished by the partner at closing.
On December 29, 2010, the Company admitted an 80% institutional partner to an entity owning a developable land parcel in Florida in exchange for $11.7 million in cash and retained a 20% equity interest. This land parcel is now unconsolidated. Total project cost is approximately $76.1 million and construction is expected to start in the first quarter of 2011. The Company is responsible for constructing the project and has given certain construction cost overun guarantees.
The Company is the controlling partner in various consolidated partnership properties and development properties having a noncontrolling interest book value of $8.0 million at December 31, 2010. The Company has identified its development partnerships as VIEs as the Company provides substantially all of the capital for these ventures (other than third party mortgage debt, if any) despite the fact that each partner legally owns 50% of each venture. The Company is the primary beneficiary as it exerts the most significant power over the ventures, absorbs the majority of the expected losses and has the right to receive a majority of the expected residual returns. The assets net of liabilities of the Company’s VIEs are restricted in their use to the
specific VIE to which they relate and are not available for general corporate use. The Company does not have any unconsolidated VIEs.
7.
Deposits - Restricted
The following table presents the Company’s restricted deposits as of December 31, 2010 and 2009 (amounts in thousands):
(1)
Primarily represents amounts held in escrow by the lender and released as draw requests are made on fully funded development mortgage loans.
8.
Mortgage Notes Payable
As of December 31, 2010, the Company had outstanding mortgage debt of approximately $4.8 billion.
During the year ended December 31, 2010, the Company:
n
Repaid $652.1 million of mortgage loans;
n
Obtained $173.6 million of new mortgage loan proceeds;
n
Assumed $359.1 million of mortgage debt on seven acquired properties;
n
Was released from $40.0 million of mortgage debt assumed by the purchaser on two disposed properties; and
n
Assumed $112.6 million of mortgage debt on seven previously unconsolidated properties and repaid the net $70.0 million mortgage loan (net of $42.6 million of cash collateral held by the lender) concurrent with closing using proceeds drawn from the Company’s line of credit.
The Company recorded approximately $2.5 million and $1.0 million of prepayment penalties and write-offs of unamortized deferred financing costs, respectively, during the year ended December 31, 2010 as additional interest expense related to debt extinguishment of mortgages.
As of December 31, 2010, the Company had $543.4 million of secured debt subject to third party credit enhancement.
As of December 31, 2010, scheduled maturities for the Company’s outstanding mortgage indebtedness were at various dates through September 1, 2048. At December 31, 2010, the interest rate range on the Company’s mortgage debt was 0.21% to 11.25%. During the year ended December 31, 2010, the weighted average interest rate on the Company’s mortgage debt was 4.79%.
The historical cost, net of accumulated depreciation, of encumbered properties was $5.6 billion and $5.8 billion at December 31, 2010 and 2009, respectively.
Aggregate payments of principal on mortgage notes payable for each of the next five years and thereafter are as follows (amounts in thousands):
As of December 31, 2009, the Company had outstanding mortgage debt of approximately $4.8 billion.
During the year ended December 31, 2009, the Company:
n
Repaid $956.8 million of mortgage loans;
n
Obtained $500.0 million of mortgage loan proceeds through the issuance of an 11-year cross-collateralized loan with an all-in fixed interest rate for 10 years at approximately 5.6% secured by 13 properties;
n
Obtained $40.0 million of new mortgage loans to accommodate the delayed sale of two properties that closed in January 2010;
n
Obtained $198.8 million of new mortgage loans on development properties;
n
Recognized a gain on early debt extinguishment of $2.4 million and wrote-off approximately $1.1 million of unamortized deferred financing costs; and
n
Was released from $17.3 million of mortgage debt assumed by the purchaser on two disposed properties.
As of December 31, 2009, scheduled maturities for the Company’s outstanding mortgage indebtedness were at various dates through September 1, 2048. At December 31, 2009, the interest rate range on the Company’s mortgage debt was 0.20% to 12.465%. During the year ended December 31, 2009, the weighted average interest rate on the Company’s mortgage debt was 4.89%.
9.
Notes
The following tables summarize the Company’s unsecured note balances and certain interest rate and maturity date information as of and for the years ended December 31, 2010 and 2009, respectively:
(1)
At December 31, 2010 and 2009, $300.0 million in fair value interest rate swaps converts a portion of the $400.0 million face value 5.200% notes due April 1, 2013 to a floating interest rate.
(2)
The floating interest rate is based on the 7-Day Securities Industry and Financial Markets Association (“SIFMA”) rate, which is the tax-exempt index equivalent of LIBOR. The interest rate is 0.27% at December 31, 2009.
The Company’s unsecured public debt contains certain financial and operating covenants including, among other things, maintenance of certain financial ratios. The Company was in compliance with its unsecured public debt covenants for both the years ended December 31, 2010 and 2009.
An unlimited amount of equity and debt securities remains available for issuance by the Company and the Operating Partnership under effective shelf registration statements filed with the SEC. Most recently, the Company and the Operating Partnership filed a universal shelf registration statement for an unlimited amount of equity and debt securities that became automatically effective upon filing with the SEC in October 2010 (under SEC regulations enacted in 2005, the registration statement automatically expires on October 14, 2013 and does not contain a maximum issuance amount).
During the year ended December 31, 2010, the Company:
n
Issued $600.0 million of ten-year 4.75% fixed rate public notes in a public offering at an all-in effective interest rate of 5.09%, receiving net proceeds of $595.4 million before underwriting fees and other expenses.
During the year ended December 31, 2009, the Company:
n
Repurchased at par $105.2 million of its 4.75% fixed rate public notes due June 15, 2009 pursuant to a cash tender offer announced on January 16, 2009 and wrote-off approximately $79,000 of unamortized deferred financing costs and approximately $46,000 of unamortized discounts on notes payable;
n
Repaid the remaining $122.2 million of its 4.75% fixed rate public notes at maturity;
n
Repurchased at par $185.2 million of its 6.95% fixed rate public notes due March 2, 2011 pursuant to a cash tender offer announced on January 16, 2009 and wrote-off approximately $0.4 million of unamortized deferred financing costs and approximately $1.0 million of unamortized discounts on notes payable;
n
Repurchased $21.7 million of its 6.95% fixed rate public notes due March 2, 2011 at a price of 106% of par pursuant to a cash tender offer announced on December 2, 2009, recognized a loss on early debt extinguishment of $1.3 million and wrote-off approximately $0.2 million of unamortized net premiums on notes payable;
n
Repurchased $146.1 million of its 6.625% fixed rate public notes due March 15, 2012 at a price of 108% of par pursuant to a cash tender offer announced on December 2, 2009, recognized a loss on early debt extinguishment of $11.7 million and wrote-off approximately $0.3 million of unamortized deferred financing costs and approximately $0.2 million of unamortized net discounts on notes payable;
n
Repurchased $127.9 million of its 5.50% fixed rate public notes due October 1, 2012 at a price of 107% of par pursuant to a cash tender offer announced on December 2, 2009, recognized a loss on early debt extinguishment of $9.0 million and wrote-off approximately $0.5 million of unamortized deferred financing costs and approximately $0.4 million of unamortized discounts on notes payable;
n
Repurchased $75.8 million of its 5.20% fixed rate tax-exempt notes and wrote-off approximately $0.7 million of unamortized deferred financing costs;
n
Repurchased $17.5 million of its 3.85% convertible fixed rate public notes due August 15, 2026 at a price of 88.4% of par and recognized a gain on early debt extinguishment of $2.0 million and wrote-off approximately $0.1 million of unamortized deferred financing costs and approximately $0.8 million of unamortized discounts on notes payable; and
n
Repurchased at par $48.5 million of its 3.85% convertible fixed rate public notes due August 15, 2026 pursuant to a cash tender offer announced on December 2, 2009 and wrote-off approximately $0.3 million of unamortized deferred financing costs and approximately $1.5 million of unamortized discounts on notes payable.
On October 11, 2007, the Operating Partnership closed on a $500.0 million senior unsecured term loan. Effective April 12, 2010, the Company exercised the first of its two one-year extension options. As a result, the maturity date is now October 5, 2011 and there is one remaining one-year extension option exercisable by the Company. The Operating Partnership has the ability to increase available borrowings by an additional $250.0 million under certain circumstances. The loan bears interest at variable rates based upon LIBOR plus a spread (currently 0.50%) dependent upon the current credit rating on the Operating Partnership’s long-term senior unsecured debt. EQR has guaranteed the Operating Partnership’s term loan up to the maximum amount and for the full term of the loan.
On August 23, 2006, the Operating Partnership issued $650.0 million of exchangeable senior notes that mature on August 15, 2026. The notes have a current face value of $482.5 million at December 31, 2010 and bear interest at a fixed rate of 3.85%. The notes are exchangeable into EQR Common Shares, at the option of the holders, under specific circumstances or on or after August 15, 2025, at an initial and current exchange rate of 16.3934 shares per $1,000 principal amount of notes (equivalent to an initial and current exchange price of $61.00 per share). The exchange rate is subject to adjustment in certain circumstances, including upon an increase in the Company’s dividend rate at the time of issuance. Upon an exchange of the notes, the Operating Partnership will settle any amounts up to the principal amount of the notes in cash and the remaining exchange value, if any, will be settled, at the Operating Partnership’s option, in cash, EQR Common Shares or a combination of both. See Note 2 for more information on the change in the recognition of interest expense for the exchangeable senior notes.
On or after August 18, 2011, the Operating Partnership may redeem the notes at a redemption price equal to the principal amount of the notes plus any accrued and unpaid interest thereon. Upon notice of redemption by the Operating Partnership, the holders may elect to exercise their exchange rights. In addition, on August 18, 2011, August 15, 2016 and August 15, 2021 or following the occurrence of certain change in control transactions prior to August 18, 2011, note holders may require the Operating Partnership to repurchase the notes for an amount equal to the principal amount of the notes plus any accrued and unpaid interest thereon.
Note holders may also require an exchange of the notes should the closing sale price of Common Shares exceed 130% of the exchange price for a certain period of time or should the trading price on the notes be less than 98% of the product of the closing sales price of Common Shares multiplied by the applicable exchange rate for a certain period of time.
Aggregate payments of principal on unsecured notes payable for each of the next five years and thereafter are as follows (amounts in thousands):
(1)
Principal payments on unsecured notes include amortization of any discounts or premiums related to the notes. Premiums and discounts are amortized over the life of the unsecured notes.
(2)
Includes the Company’s $500.0 million term loan facility, which originally matured on October 5, 2010. Effective April 12, 2010, the Company exercised the first of its two one-year extension options. As a result, the maturity date is now October 5, 2011 and there is one remaining one-year extension option exercisable by the Company.
(3)
Includes $482.5 million face value of 3.85% convertible unsecured debt with a final maturity of 2026.
10.
Lines of Credit
The Operating Partnership has a $1.425 billion (net of $75.0 million which had been committed by a now bankrupt financial institution and is not available for borrowing) unsecured revolving credit facility maturing on February 28, 2012, with the ability to increase available borrowings by an additional $500.0 million by adding additional banks to the facility or obtaining the agreement of existing banks to increase their commitments. Advances under the credit facility bear interest at variable rates based upon LIBOR at various interest periods plus a spread (currently 0.50%) 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.
As of December 31, 2010, the amount available on the credit facility was $1.28 billion (net of $147.3 million which was restricted/dedicated to support letters of credit and net of the $75.0 million discussed above) and there was no amount outstanding. During the year ended December 31, 2010, the weighted average interest rate was 0.66%. As of December 31, 2009, the amount available on the credit facility was $1.37 billion (net of $56.7 million which was restricted/dedicated to support letters of credit and net of the $75.0 million discussed above). The Company did not draw and had no balance outstanding on its revolving credit facility at any time during the year ended December 31, 2009.
11.
Derivative and Other Fair Value Instruments
The valuation of financial instruments requires the Company to make estimates and judgments that affect the fair value of the instruments. The Company, where possible, bases the fair values of its financial instruments, including its derivative instruments, on listed market prices and third party quotes. Where these are not available, the Company bases its estimates on current instruments with similar terms and maturities or on other factors relevant to the financial instruments.
The carrying values of the Company’s mortgage notes payable and unsecured notes were approximately $4.8 billion and $5.2 billion, respectively, at December 31, 2010. The fair values of the Company’s mortgage notes payable and unsecured notes were approximately $4.7 billion and $5.5 billion, respectively, at December 31, 2010. The carrying values of the Company’s mortgage notes payable and unsecured notes were approximately $4.8 billion and $4.6 billion, respectively, at December 31, 2009. The fair values of the Company’s mortgage notes payable and unsecured notes were approximately $4.6 billion and $4.7 billion, respectively, at December 31, 2009. The fair values of the Company’s financial instruments (other than mortgage notes payable, unsecured notes, derivative instruments and investment securities) including cash and cash equivalents and other financial instruments, approximate their carrying or contract values.
In the normal course of business, the Company is exposed to the effect of interest rate changes. The Company seeks to manage these risks by following established risk management policies and procedures including the use of derivatives to hedge interest rate risk on debt instruments.
The following table summarizes the Company’s consolidated derivative instruments at December 31, 2010 (dollar amounts are in thousands):
(1)
Fair Value Hedges - 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. These swaps have mandatory counterparty terminations from 2012 through 2014, and $350.0 million, $400.0 million and $200.0 million are designated for 2011, 2012 and 2013 maturities, respectively.
(3)
Development Cash Flow Hedges - Converts outstanding floating rate debt to a fixed interest rate.
The following tables provide the location of the Company’s derivative instruments within the accompanying Consolidated Balance Sheets and their fair market values as of December 31, 2010 and 2009, respectively (amounts in thousands):
The following tables provide a summary of the effect of fair value hedges on the Company’s accompanying Consolidated Statements of Operations for the years ended December 31, 2010 and 2009, respectively (amounts in thousands):
The following tables provide a summary of the effect of cash flow hedges on the Company’s accompanying Consolidated Statements of Operations for the years ended December 31, 2010 and 2009, respectively (amounts in thousands):
As of December 31, 2010 and 2009, there were approximately $58.3 million in deferred losses, net, included in accumulated other comprehensive (loss) and $4.2 million in deferred gains, net, included in accumulated other comprehensive income, respectively, related to derivative instruments. Based on the estimated fair values of the net derivative instruments at December 31, 2010, the Company may recognize an estimated $5.6 million of accumulated other comprehensive (loss) as additional interest expense during the year ending December 31, 2011.
In July 2010, the Company paid approximately $10.0 million to settle a forward starting swap in conjunction with the issuance of $600.0 million of ten-year fixed rate public notes. The entire amount was deferred as a component of accumulated other comprehensive loss and is being recognized as an increase to interest expense over the term of the notes.
In January 2009, the Company received approximately $0.4 million to terminate a fair value hedge of interest rates in conjunction with the public tender of the Company’s 4.75% fixed rate public notes due June 15, 2009. Approximately $0.2 million of the settlement received was deferred and recognized as a reduction of interest expense through the maturity on June 15, 2009.
In April and May 2009, the Company received approximately $10.8 million to terminate six treasury locks in conjunction with the issuance of a $500.0 million 11-year mortgage loan. The entire amount was deferred as a component of accumulated other comprehensive income and is recognized as a reduction of interest expense over the first ten years of the mortgage loan.
During the year ended December 31, 2009, the Company sold a majority of its investment securities, receiving proceeds of approximately $215.8 million, and recorded a $4.9 million realized gain on sale (specific identification) which is included in interest and other income. The following tables set forth the maturity, amortized cost, gross unrealized gains and losses, book/
fair value and interest and other income of the various investment securities held as of December 31, 2010 and 2009, respectively (amounts in thousands):
A three-level valuation hierarchy exists for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The three levels are defined as follows:
n
Level 1 - Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
n
Level 2 - Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
n
Level 3 - Inputs to the valuation methodology are unobservable and significant to the fair value measurement.
The Company’s derivative positions are valued using models developed by the respective counterparty as well as models developed internally by the Company that use as their basis readily observable market parameters (such as forward yield curves and credit default swap data) and are classified within Level 2 of the valuation hierarchy. In addition, employee holdings other than Common Shares within the supplemental executive retirement plan (the “SERP”) have a fair value of $58.1 million as of December 31, 2010 and are included in other assets and other liabilities on the consolidated balance sheet. These SERP investments are valued using quoted market prices for identical assets and are classified within Level 1 of the valuation hierarchy.
The Company’s investment securities are valued using quoted market prices or readily available market interest rate data. The quoted market prices are classified within Level 1 of the valuation hierarchy and the market interest rate data are classified within Level 2 of the valuation hierarchy. Redeemable Noncontrolling Interests - Operating Partnership are valued using the quoted market price of Common Shares and are classified within Level 2 of the valuation hierarchy.
The Company’s real estate asset impairment charges were the result of an analysis of the parcels’ estimated fair value (determined using internally developed models that were based on market assumptions and comparable sales data) (Level 3) compared to their current capitalized carrying value. The market assumptions used as inputs to the Company’s fair value model include construction costs, leasing assumptions, growth rates, discount rates, terminal capitalization rates and development yields, along with the Company’s current plans for each individual asset. The Company uses data on its existing portfolio of properties and its recent acquisition and development properties, as well as similar market data from third party sources, when available, in determining these inputs. The valuation techniques used to measure fair value is consistent with how similar assets were measured in prior periods. See Note 20 for further discussion.
12.
Earnings Per Share
The following tables set forth the computation of net income per share - basic and net income per share - diluted (amounts in thousands except per share amounts):
(1)
Potential common shares issuable from the assumed conversion of OP Units and the exercise/vesting of long-term compensation award shares/units are automatically anti-dilutive and therefore excluded from the diluted earnings per share calculation as the Company had a loss from continuing operations for the years ended December 31, 2010, 2009 and 2008, respectively.
Convertible preferred shares/units that could be converted into 325,103, 402,501 and 427,090 weighted average Common Shares for the years ended December 31, 2010, 2009 and 2008, respectively, were outstanding but were not included in the computation of diluted earnings per share because the effects would be anti-dilutive. In addition, the effect of the Common Shares that could ultimately be issued upon the conversion/exchange of the Operating Partnership’s $650.0 million ($482.5 million outstanding at December 31, 2010) exchangeable senior notes was not included in the computation of diluted earnings per share because the effects would be anti-dilutive.
For additional disclosures regarding the employee share options and restricted shares, see Notes 2 and 14.
13.
Discontinued Operations
The Company has presented separately as discontinued operations in all periods the results of operations for all consolidated assets disposed of and all properties held for sale, if any.
The components of discontinued operations are outlined below and include the results of operations for the respective periods that the Company owned such assets during each of the years ended December 31, 2010, 2009 and 2008 (amounts in thousands).
(1)
Includes expenses paid in the current period for properties sold or held for sale in prior periods related to the Company’s period of ownership.
(2)
Includes only interest expense specific to secured mortgage notes payable for properties sold and/or held for sale.
For the properties sold during 2010, the investment in real estate, net of accumulated depreciation, and the mortgage notes payable balances at December 31, 2009 were $430.5 million and $89.4 million, respectively.
14.
Share Incentive Plans
On May 15, 2002, the shareholders of EQR approved the Company’s 2002 Share Incentive Plan. The maximum aggregate number of awards that may be granted under this plan may not exceed 7.5% of the Company’s outstanding Common Shares calculated on a “fully diluted” basis and determined annually on the first day of each calendar year. As of January 1, 2011, this amount equaled 22,785,696, of which 5,395,739 shares were available for future issuance. No awards may be granted under the 2002 Share Incentive Plan, as restated, after February 20, 2012.
Pursuant to the 2002 Share Incentive Plan, as restated, and the Amended and Restated 1993 Share Option and Share Award Plan, as amended (collectively the “Share Incentive Plans”), officers, trustees and key employees of the Company may be granted share options to acquire Common Shares (“Options”) including non-qualified share options (“NQSOs”), incentive share options (“ISOs”) and share appreciation rights (“SARs”), or may be granted restricted or non-restricted shares, subject to conditions and restrictions as described in the Share Incentive Plans. In addition, each year prior to 2007, certain executive officers of the Company participated in the Company’s performance-based restricted share plan. Effective January 1, 2007, the Company elected to discontinue the award of performance-based award grants. Options, SARs, restricted shares, performance shares and LTIP Units (see discussion below) are sometimes collectively referred to herein as “Awards”.
The Options are generally granted at the fair market value of the Company’s Common Shares at the date of grant, vest in three equal installments over a three-year period, are exercisable upon vesting and expire ten years from the date of grant. The exercise price for all Options under the Share Incentive Plans is equal to the fair market value of the underlying Common Shares at the time the Option is granted. Options exercised result in new Common Shares being issued on the open market. The Amended and Restated 1993 Share Option and Share Award Plan, as amended, will terminate at such time as all outstanding Awards have expired or have been exercised/vested. The Board of Trustees may at any time amend or terminate the Share Incentive Plans, but termination will not affect Awards previously granted. Any Options which had vested prior to such a termination would remain exercisable by the holder.
Restricted shares that have been awarded through December 31, 2010 generally vest three years from the award date. In addition, the Company’s unvested restricted shareholders have the same voting rights as any other Common Share holder. During the three-year period of restriction, the Company’s unvested restricted shareholders receive quarterly dividend payments on their shares at the same rate and on the same date as any other Common Share holder. As a result, dividends paid on unvested restricted shares are included as a component of retained earnings and have not been considered in reducing net income available to Common Shares in a manner similar to the Company’s preferred share dividends for the earnings per share calculation. If employment is terminated prior to the lapsing of the restriction, the shares are generally canceled.
In December 2008, the Company’s 2002 Share Incentive Plan was amended to allow for the issuance of long-term incentive plan units (“LTIP Units”) to officers of the Company as an alternative to the Company’s restricted shares. LTIP Units are a class of partnership interests that under certain conditions, including vesting, are convertible by the holder into an equal number of OP Units, which are redeemable by the holder for EQR Common Shares on a one-for-one basis or the cash value of such shares at the option of the Company. In connection with the February 2009 grant of long-term incentive compensation for services provided during 2008, officers of the Company were allowed to choose, on a one-for-one basis, between restricted shares and LTIP Units. Similar to restricted shares, LTIP Units generally vest three years from the award date. In addition, LTIP Unit holders receive quarterly dividend payments on their LTIP Units at the same rate and on the same date as any other OP Unit holder. As a result, dividends paid on LTIP Units are included as a component of Noncontrolling Interests - Operating Partnership and have not been considered in reducing net income available to Common Shares in a manner similar to the Company’s preferred share dividends for the earnings per share calculation. If employment is terminated prior to vesting, the LTIP Units are generally canceled. An LTIP Unit will automatically convert to an OP Unit when the capital account of each LTIP Unit increases (“books-up”) to a specified target. If the capital target is not attained within ten years following the date of issuance, the LTIP Unit will automatically be canceled and no compensation will be payable to the holder of such canceled LTIP Unit.
The Company’s Share Incentive Plans provide for certain benefits upon retirement at or after age 62. As of November 4, 2008, but effective as of January 1, 2009, the Company changed the definition of retirement for employees (including all officers but not non-employee members of the Company’s Board of Trustees) under its Share Incentive Plans. For employees hired prior to January 1, 2009, retirement generally will mean the termination of employment (other than for cause): (i) on or after age 62; or (ii) prior to age 62 after meeting the requirements of the Rule of 70 (described below). For employees hired after January 1, 2009, retirement generally will mean the termination of employment (other than for cause) after meeting the requirements of the Rule of 70.
The Rule of 70 is met when an employee’s years of service with the Company (which must be at least 15 years) plus his or her age (which must be at least 55 years) on the date of termination equals or exceeds 70 years. In addition, the employee must give the Company at least 6 months’ advance written notice of his or her intention to retire and sign a release upon termination of employment, releasing the Company from customary claims and agreeing to ongoing non-competition and employee non-solicitation provisions.
John Powers, Executive Vice President - Human Resources, became eligible for retirement in 2009 as he turned 62. Frederick C. Tuomi, President - Property Management, became eligible for retirement under the Rule of 70 in 2009. Bruce C. Strohm, Executive Vice President and General Counsel, became eligible for retirement under the Rule of 70 in 2010. David J. Neithercut, Chief Executive Officer and President, will become eligible for retirement under the Rule of 70 in 2011.
For employees hired prior to January 1, 2009, who retire at or after age 62, such employee’s unvested restricted shares, LTIP Units and share options would immediately vest, and share options would continue to be exercisable for the balance of the applicable ten-year option period, as was provided under the Share Incentive Plans prior to the adoption of the Rule of 70. For all other employees (those hired after January 1, 2009 and those hired before such date who choose to retire prior to age 62), upon such retirement under the new Rule of 70 definition of retirement of employees, such employee’s unvested restricted shares, LTIP Units and share options would continue to vest per the original vesting schedule (subject to immediate vesting upon the occurrence of a subsequent change in control of the Company or the employee’s death), and options would continue to be exercisable for the balance of the applicable ten-year option period, subject to the employee’s compliance with the non-competition and employee non-solicitation provisions. If an employee violates these provisions after such retirement, all unvested restricted shares, unvested LTIP Units and unvested and vested share options at the time of the violation would be void, unless otherwise determined by the Compensation Committee of the Company’s Board of Trustees.
The following tables summarize compensation information regarding the performance shares, restricted shares, LTIP Units, share options and Employee Share Purchase Plan (“ESPP”) for the three years ended December 31, 2010, 2009 and 2008 (amounts in thousands):
Compensation expense is generally recognized for Awards as follows:
n
Restricted shares, LTIP Units and share options - Straight-line method over the vesting period of the options or shares regardless of cliff or ratable vesting distinctions.
n
Performance shares - Accelerated method with each vesting tranche valued as a separate award, with a separate vesting date, consistent with the estimated value of the award at each period end.
n
ESPP discount - Immediately upon the purchase of common shares each quarter.
The Company accelerates the recognition of compensation expense for all Awards for those individuals approaching or meeting the retirement age criteria discussed above. The total compensation expense related to Awards not yet vested at December 31, 2010 is $19.5 million, which is expected to be recognized over a weighted average term of 1.5 years.
See Note 2 for additional information regarding the Company’s share-based compensation.
The table below summarizes the Award activity of the Share Incentive Plans for the three years ended December 31, 2010, 2009 and 2008:
(1)
The weighted average grant date fair value for Options granted during the years ended December 31, 2010, 2009 and 2008 was $6.18 per share, $3.38 per share and $4.08 per share, respectively.
(2)
The aggregate intrinsic value of options exercised during the years ended December 31, 2010, 2009 and 2008 was $39.6 million, $2.8 million and $15.6 million, respectively. These values were calculated as the difference between the strike price of the underlying awards and the per share price at which each respective award was exercised.
(3)
The fair value of restricted shares vested during the years ended December 31, 2010, 2009 and 2008 was $9.1 million, $8.0 million and $23.9 million, respectively.
The following table summarizes information regarding options outstanding and exercisable at December 31, 2010:
Options Outstanding (1)
Options Exercisable (2)
Weighted
Average
Weighted
Weighted
Remaining
Average
Average
Contractual
Exercise
Exercise
Range of Exercise Prices
Options
Life in Years
Price
Options
Price
$21.40 to $26.75
2,974,937
6.18
$
23.42
1,403,771
$
23.82
$26.76 to $32.10
2,478,594
3.09
$
29.99
2,478,594
$
29.99
$32.11 to $37.45
1,374,888
9.01
$
32.96
23,546
$
32.23
$37.46 to $42.80
2,363,450
5.87
$
40.44
2,023,316
$
40.75
$42.81 to $48.15
4,202
5.32
$
45.25
4,202
$
45.25
$48.16 to $53.50
910,417
6.09
$
53.19
853,222
$
53.50
$21.40 to $53.50
10,106,488
5.73
$
33.00
6,786,651
$
34.89
Vested and expected to vest
as of December 31, 2010
9,718,763
5.69
$
33.12
(1)
The aggregate intrinsic value of options outstanding that are vested and expected to vest as of December 31, 2010 is $184.3 million.
(2)
The aggregate intrinsic value and weighted average remaining contractual life in years of options exercisable as of December 31, 2010 is $117.1 million and 4.4 years, respectively.
Note: The aggregate intrinsic values in Notes (1) and (2) above were both calculated as the excess, if any, between the Company’s closing share price of $51.95 per share on December 31, 2010 and the strike price of the underlying awards.
As of December 31, 2009 and 2008, 7,974,815 Options (with a weighted average exercise price of $33.55) and 7,522,344 Options (with a weighted average exercise price of $31.58) were exercisable, respectively.
15.
Employee Plans
The Company established an Employee Share Purchase Plan to provide each employee and trustee the ability to annually acquire up to $100,000 of Common Shares of the Company. In 2003, the Company’s shareholders approved an increase in the aggregate number of Common Shares available under the ESPP to 7,000,000 (from 2,000,000). The Company has 3,403,970 Common Shares available for purchase under the ESPP at December 31, 2010. The Common Shares may be purchased quarterly at a price equal to 85% of the lesser of: (a) the closing price for a share on the last day of such quarter; and (b) the greater of: (i) the closing price for a share on the first day of such quarter, and (ii) the average closing price for a share for all the business days in the quarter. The following table summarizes information regarding the Common Shares issued under the ESPP:
The Company established a defined contribution plan (the “401(k) Plan”) to provide retirement benefits for employees that meet minimum employment criteria. The Company matches dollar for dollar up to the first 3% of eligible compensation that a participant contributes to the 401(k) Plan. Participants are vested in the Company’s contributions over five years. The Company recognized an expense in the amount of $4.0 million, $3.5 million and $3.8 million for the years ended December 31, 2010, 2009 and 2008, respectively.
The Company may also elect to make an annual discretionary profit-sharing contribution as a percentage of each individual employee’s eligible compensation under the 401(k) Plan. The Company did not make a contribution for the years ended December 31, 2010, 2009 and 2008 and as such, no expense was recognized in these years.
The Company established a supplemental executive retirement plan (the “SERP”) to provide certain officers and trustees an opportunity to defer a portion of their eligible compensation in order to save for retirement. The SERP is restricted to investments in Company Common Shares, certain marketable securities that have been specifically approved and cash equivalents. The deferred compensation liability represented in the SERP and the securities issued to fund such deferred compensation liability are consolidated by the Company and carried on the Company’s balance sheet, and the Company’s Common Shares held in the SERP are accounted for as a reduction to paid in capital.
16.
Distribution Reinvestment and Share Purchase Plan
On November 3, 1997, the Company filed with the SEC a Form S-3 Registration Statement to register 14,000,000 Common Shares pursuant to a Distribution Reinvestment and Share Purchase Plan (the “DRIP Plan”). The registration statement was declared effective on November 25, 1997. The remaining shares available for issuance under the 1997 registration lapsed in December 2008.
On December 16, 2008, the Company filed with the SEC a Form S-3 Registration Statement to register 5,000,000 Common Shares under the DRIP Plan. The registration statement was automatically declared effective the same day and expires at the earlier of the date in which all 5,000,000 shares have been issued or December 15, 2011. The Company has 4,905,736 Common Shares available for issuance under the DRIP Plan at December 31, 2010.
The DRIP Plan provides holders of record and beneficial owners of Common Shares and Preferred Shares with a simple and convenient method of investing cash distributions in additional Common Shares (which is referred to herein as the “Dividend Reinvestment - DRIP Plan”). Common Shares may also be purchased on a monthly basis with optional cash payments made by participants in the DRIP Plan and interested new investors, not currently shareholders of the Company, at the market price of the Common Shares less a discount ranging between 0% and 5%, as determined in accordance with the DRIP Plan (which is referred to herein as the “Share Purchase - DRIP Plan”). Common Shares purchased under the DRIP Plan may, at the option of the Company, be directly issued by the Company or purchased by the Company’s transfer agent in the open market using participants’ funds.
17.
Transactions with Related Parties
The Company provided asset and property management services to certain related entities for properties not owned by the Company, which terminated in December 2008. Fees received for providing such services were approximately $0.3 million for the year ended December 31, 2008.
The Company leases its corporate headquarters from an entity controlled by EQR’s Chairman of the Board of Trustees. The lease terminates on July 31, 2021. Amounts incurred for such office space for the years ended December 31, 2010, 2009 and 2008, respectively, were approximately $2.7 million, $3.0 million and $2.9 million. The Company believes these amounts equal market rates for such rental space.
18.
Commitments and Contingencies
The Company, as an owner of real estate, is subject to various Federal, state and local environmental laws. Compliance by the Company with existing laws has not had a material adverse effect on the Company. However, the Company cannot predict the impact of new or changed laws or regulations on its current properties or on properties that it may acquire in the future.
The Company is party to a housing discrimination lawsuit brought by a non-profit civil rights organization in April 2006 in the U.S. District Court for the District of Maryland. The suit alleges that the Company designed and built approximately 300 of its properties in violation of the accessibility requirements of the Fair Housing Act and Americans With Disabilities Act. The suit seeks actual and punitive damages, injunctive relief (including modification of non-compliant properties), costs and attorneys’ fees. The Company believes it has a number of viable defenses, including that a majority of the named properties were completed before the operative dates of the statutes in question and/or were not designed or built by the Company. Accordingly, the Company is defending the suit vigorously. Due to the pendency of the Company’s defenses and the uncertainty of many other critical factual and legal issues, it is not possible to determine or predict the outcome of the suit or a possible loss or a range of loss, and no amounts have been accrued at December 31, 2010. While no assurances can be given, the Company does not believe that the suit, if adversely determined, would have a material adverse effect on the Company.
The Company does not believe there is any other litigation pending or threatened against it that, individually or in the aggregate, may reasonably be expected to have a material adverse effect on the Company.
The Company has established a reserve and recorded a corresponding reduction to its net gain on sales of discontinued operations related to potential liabilities associated with its condominium conversion activities. The reserve covers potential product liability related to each conversion. The Company periodically assesses the adequacy of the reserve and makes adjustments as necessary. During the year ended December 31, 2010, the Company recorded additional reserves of approximately $0.7 million, paid approximately $2.9 million in claims, settlements and legal fees and released approximately $1.2 million of remaining reserves for settled claims. As a result, the Company had total reserves of approximately $3.3 million at December 31, 2010. While no assurances can be given, the Company does not believe that the ultimate resolution of these potential liabilities, if adversely determined, would have a material adverse effect on the Company.
As of December 31, 2010, the Company has four projects totaling 717 apartment units in various stages of development with estimated completion dates ranging through September 30, 2012, as well as other completed development projects that are in various stages of lease up or are stabilized. Some of the projects are developed solely by the Company, while others were co-developed with various third party development partners. The development venture agreements with partners are primarily deal-specific, with differing terms regarding profit-sharing, equity contributions, returns on investment, buy-sell agreements and other customary provisions. The partner is most often the “general” or “managing” partner of the development venture. The typical buy-sell arrangements contain appraisal rights and provisions that provide the right, but not the obligation, for the Company to acquire the partner’s interest in the project at fair market value upon the expiration of a negotiated time period (typically two to five years after substantial completion of the project).
During the years ended December 31, 2010, 2009 and 2008, total operating lease payments incurred for office space, including a portion of real estate taxes, insurance, repairs and utilities, and including rent due under three ground leases, aggregated $7.6 million, $8.4 million and $8.3 million, respectively.
The Company has entered into a retirement benefits agreement with its Chairman of the Board of Trustees and deferred compensation agreements with its Vice Chairman and two former chief executive officers. During the years ended December 31, 2010 and 2009, the Company recognized compensation expense of $0.9 million and $1.2 million, respectively, related to these agreements. During the year ended December 31, 2008, the Company reduced compensation expense by $0.4 million related to these agreements.
The following table summarizes the Company’s contractual obligations for minimum rent payments under operating leases and deferred compensation for the next five years and thereafter as of December 31, 2010:
(a)
Minimum basic rent due for various office space the Company leases and fixed base rent due on ground leases for four properties/parcels.
(b)
Estimated payments to the Company’s Chairman, Vice Chairman and two former CEO’s based on planned retirement dates.
19.
Reportable Segments
Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by senior management. Senior management decides how resources are allocated and assesses performance on a monthly basis.
The Company’s primary business is the acquisition, development and management of multifamily residential properties, which includes the generation of rental and other related income through the leasing of apartment units to residents. Senior management evaluates the performance of each of our apartment communities individually and geographically, and both on a same store and non-same store basis; however, each of our apartment communities generally has similar economic characteristics, residents, products and services. The Company’s operating segments have been aggregated by geography in a manner identical to that which is provided to its chief operating decision maker.
The Company’s fee and asset management, development (including its partially owned properties), condominium conversion and corporate housing (Equity Corporate Housing or “ECH”) activities are immaterial and do not individually meet the threshold requirements of a reportable segment and as such, have been aggregated in the “Other” segment in the tables presented below.
All revenues are from external customers and there is no customer who contributed 10% or more of the Company’s total revenues during the three years ended December 31, 2010, 2009 or 2008.
The primary financial measure for the Company’s rental real estate segment is net operating income (“NOI”), which represents rental income less: 1) property and maintenance expense; 2) real estate taxes and insurance expense; and 3) property management expense (all as reflected in the accompanying consolidated statements of operations). The Company believes that NOI is helpful to investors as a supplemental measure of its operating performance because it is a direct measure of the actual operating results of the Company’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 tables present NOI for each segment from our rental real estate specific to continuing operations for the years ended December 31, 2010, 2009 and 2008, respectively, as well as total assets for the years ended December 31, 2010 and 2009, respectively (amounts in thousands):
(1)
Same store primarily includes all properties acquired or completed and stabilized prior to January 1, 2009, less properties subsequently sold, which represented 112,042 apartment units.
(2)
Non-same store primarily includes properties acquired after January 1, 2009, plus any properties in lease-up and not stabilized as of January 1, 2009.
(3)
Other includes ECH, development, condominium conversion overhead of $0.6 million and other corporate operations. Also reflects a $10.5 million elimination of rental income recorded in Northeast, Northwest, Southeast and Southwest operating segments related to ECH.
(1)
Same store primarily includes all properties acquired or completed and stabilized prior to January 1, 2009, less properties subsequently sold, which represented 112,042 apartment units.
(2)
Non-same store primarily includes properties acquired after January 1, 2009, plus any properties in lease-up and not stabilized as of January 1, 2009.
(3)
Other includes ECH, development, condominium conversion overhead of $1.4 million and other corporate operations. Also reflects a $9.6 million elimination of rental income recorded in Northeast, Northwest, Southeast and Southwest operating segments related to ECH.
(1)
Same store primarily includes all properties acquired or completed and stabilized prior to January 1, 2008, less properties subsequently sold, which represented 113,598 apartment units.
(2)
Non-same store primarily includes properties acquired after January 1, 2008, plus any properties in lease-up and not stabilized as of January 1, 2008.
(3)
Other includes ECH, development, condominium conversion overhead of $2.8 million and other corporate operations. Also reflects a $13.6 million elimination of rental income recorded in Northeast, Northwest, Southeast and Southwest operating segments related to ECH.
(4)
Reflects discontinued operations for properties sold during 2010.
Note: Markets included in the above geographic segments are as follows:
(a) Northeast - New England (excluding Boston), Boston, New York Metro, DC Northern Virginia and Suburban Maryland.
(b) Northwest - Denver, Portland, San Francisco Bay Area and Seattle/Tacoma.
(c) Southeast - Atlanta, Jacksonville, Orlando, South Florida and Tampa.
(d) Southwest - Albuquerque, Inland Empire, Los Angeles, Orange County, Phoenix and San Diego.
The following table presents a reconciliation of NOI from our rental real estate specific to continuing operations for the years ended December 31, 2010, 2009 and 2008, respectively (amounts in thousands):
20.
Subsequent Events/Other
Subsequent Events
Subsequent to December 31, 2010, the Company:
n
Acquired two apartment properties consisting of 521 apartment units for $137.1 million;
n
Sold two consolidated apartment properties consisting of 600 apartment units for $32.7 million;
n
Repaid $173.0 million in mortgage loans;
n
Issued 3.0 million Common Shares at an average price of $50.84 per share for total consideration of $154.5 million under the Company’s ATM share offering program; and
n
Increased its availability for issuance under the Company’s ATM share offering program to 10,000,000 Common Shares.
Other
During the year ended December 31, 2010, the Company recorded a $45.4 million non-cash asset impairment charge on two parcels of land held for development as a result of changes in the Company’s future plans for those parcels. The Company now intends to sell one parcel in the near term and contemplates a joint venture structure for the other, necessitating this impairment charge. During the year ended December 31, 2009, the Company recorded an $11.1 million non-cash asset impairment charge on a parcel of land held for development. During the year ended December 31, 2008, the Company recorded $116.4 million of non-cash asset impairment charges on land held for development related to five potential development projects that will no longer be pursued. These charges were the result of an analysis of each parcel’s estimated fair value (determined using internally developed models that were based on market assumptions and comparable sales data) compared to its current capitalized carrying value. The market assumptions used as inputs to the Company’s fair value model include construction costs, leasing assumptions, growth rates, discount rates, terminal capitalization rates and development yields, along with the Company’s current plans for each individual asset. The Company uses data on its existing portfolio of properties and its recent acquisition and development properties, as well as similar market data from third party sources, when available, in determining these inputs.
During the years ended December 31, 2010, 2009 and 2008, the Company incurred charges of $6.6 million, $1.7 million and $0.2 million, respectively, related to property acquisition costs, such as survey, title and legal fees, on the acquisition of operating properties and $5.3 million, $4.8 million and $5.6 million, respectively, related to the write-off of various pursuit and out-of-pocket costs for terminated acquisition, disposition and development transactions. These costs, totaling $11.9 million, $6.5 million and $5.8 million, respectively, are included in other expenses in the accompanying consolidated statements of operations.
During the year ended December 31, 2008, the Company recognized $0.7 million of forfeited deposits for various terminated transactions, which are included in interest and other income. During the year ended December 31, 2010, an arbitration panel awarded commissions, interest and costs in the amount of $1.7 million to the listing and marketing agent related to 38 potential condo sales at one of the Company’s properties. In addition, during 2010, 2009 and 2008, the Company received $5.2 million, $0.2 million and $1.7 million, respectively, for the settlement of litigation/insurance claims, which are included in interest and other income in the accompanying consolidated statements of operations.
On July 16, 2010, a portion of the parking garage collapsed at one of the Company’s rental properties (Prospect Towers in Hackensack, New Jersey). The Company estimates that the costs related to such collapse (both expensed and capitalized), including providing for residents’ interim needs, lost revenue and garage reconstruction, will be approximately $12.0 million, after insurance reimbursements of $8.0 million. Costs to rebuild the garage will be capitalized as incurred. Other costs, like those
to accommodate displaced residents, lost revenue due to a portion of the property being temporarily unavailable for occupancy and legal costs, will reduce earnings as they are incurred. Generally, insurance proceeds will be recorded as increases to earnings as they are received. An impairment charge of $1.3 million was recognized to write-off the net book value of the collapsed garage. During the year ended December 31, 2010, the Company received approximately $4.0 million in insurance proceeds which fully offset the impairment charge and partially offset expenses of $5.5 million that were recorded relating to this loss and are included in real estate taxes and insurance on the consolidated statements of operations.
21.
Quarterly Financial Data (Unaudited)
The following unaudited quarterly data has been prepared on the basis of a December 31 year-end. All amounts have also been restated in accordance with the guidance on discontinued operations and reflect dispositions and/or properties held for sale through December 31, 2010. Amounts are in thousands, except for per share amounts.
(1)
The amounts presented for the first three quarters of 2010 are not equal to the same amounts previously reported in the respective Form 10-Q’s filed with the SEC for each period as a result of changes in discontinued operations due to additional property sales which occurred throughout 2010. Below is a reconciliation to the amounts previously reported:
(2)
The amounts presented for the four quarters of 2009 are not equal to the same amounts previously reported in either the Form 8-K filed with the SEC on September 14, 2010 (for the first, second and fourth quarters of 2009) or in the third quarter Form 10-Q filed with the SEC on November 4, 2010 (for the third quarter of 2009) primarily as a result of changes in discontinued operations due to additional property sales which occurred throughout 2010. Below is a reconciliation to the amounts previously reported:
* The Company did not have any extraordinary items or cumulative effect of change in accounting principle during the years ended December 31, 2010 and 2009. Therefore, income before extraordinary items and cumulative effect of change in accounting principle is not shown as it was equal to the net income amounts disclosed above.
Schedule III
Real Estate and Accumulated Depreciation Disclosure
EQUITY RESIDENTIAL
Schedule III - Real Estate and Accumulated Depreciation
Overall Summary
December 31, 2010
(1)
See attached Encumbrances Reconciliation.
S-1
EQUITY RESIDENTIAL
Schedule III - Real Estate and Accumulated Depreciation
Encumbrances Reconciliation
December 31, 2010
(1)
Temporary letters of credit supported by the Company’s revolving credit facility and/or a temporary guaranty from the Operating Partnership were posted as collateral in place of sold properties. Property substitutions closed in January 2011 and the letters of credit and guaranty were terminated.
S-2
EQUITY RESIDENTIAL
Schedule III - Real Estate and Accumulated Depreciation
(Amounts in thousands)
The changes in total real estate for the years ended December 31, 2010, 2009 and 2008 are as follows:
The changes in accumulated depreciation for the years ended December 31, 2010, 2009 and 2008 are as follows:
S-3
EQUITY RESIDENTIAL
Schedule III - Real Estate and Accumulated Depreciation
December 31, 2010
Cost Capitalized
Subsequent to
Gross Amount Carried
Initial Cost to
Acquisition
at Close of
Description
Company
(Improvements, net) (E)
Period 12/31/10
Date of
Building &
Building &
Building &
Accumulated
Investment in Real
Apartment Name
Location
Construction
Units (H)
Land
Fixtures
Land
Fixtures
Land
Fixtures (A)
Total (B)
Depreciation (C)
Estate, Net at 12/31/10 (B)
Encumbrances
EQR Wholly Owned Unencumbered:
500 West 23rd Street (fka 10 Chelsea)
New York, NY
(F)
-
$
-
$
27,382,360
$
-
$
-
$
-
$
27,382,360
$
27,382,360
$
-
$
27,382,360
$
-
1210 Mass
Washington, D.C. (G)
9,213,512
36,559,189
-
285,543
9,213,512
36,844,732
46,058,244
(7,702,999
)
38,355,245
-
1401 Joyce on Pentagon Row
Arlington, VA
9,780,000
89,680,000
-
163,567
9,780,000
89,843,567
99,623,567
(7,954,463
)
91,669,104
-
1660 Peachtree
Atlanta, GA
7,924,126
23,602,563
-
2,032,029
7,924,126
25,634,592
33,558,718
(7,213,204
)
26,345,514
-
2201 Pershing Drive
Arlington, VA
(F)
-
12,054,081
2,652,636
-
-
12,054,081
2,652,636
14,706,717
-
14,706,717
-
2400 M St
Washington, D.C. (G)
30,006,593
114,013,785
-
732,059
30,006,593
114,745,844
144,752,437
(21,822,792
)
122,929,645
-
420 East 80th Street
New York, NY
39,277,000
23,026,984
-
2,501,381
39,277,000
25,528,365
64,805,365
(5,980,711
)
58,824,654
-
425 Mass
Washington, D.C. (G)
28,150,000
138,600,000
-
1,953,014
28,150,000
140,553,014
168,703,014
(4,494,218
)
164,208,796
-
600 Washington
New York, NY (G)
32,852,000
43,140,551
-
195,058
32,852,000
43,335,609
76,187,609
(9,485,348
)
66,702,261
-
70 Greene
Jersey City, NJ (G)
28,170,659
239,232,094
-
103,450
28,170,659
239,335,544
267,506,203
(6,599,249
)
260,906,954
-
71 Broadway
New York, NY (G)
22,611,600
77,492,171
-
2,960,860
22,611,600
80,453,031
103,064,631
(17,989,358
)
85,075,273
-
777 Sixth
New York, NY (G)
65,352,706
65,747,294
-
282,143
65,352,706
66,029,437
131,382,143
(8,432,644
)
122,949,499
-
Abington Glen
Abington, MA
553,105
3,697,396
-
2,359,072
553,105
6,056,468
6,609,573
(2,794,784
)
3,814,789
-
Acacia Creek
Scottsdale, AZ
1988-1994
3,663,473
21,172,386
-
2,814,423
3,663,473
23,986,809
27,650,282
(11,190,829
)
16,459,453
-
Arden Villas
Orlando, FL
5,500,000
28,600,796
-
3,182,624
5,500,000
31,783,420
37,283,420
(8,171,582
)
29,111,838
-
Arlington at Perimeter Center
Atlanta, GA
2,448,000
8,099,110
-
114,675
2,448,000
8,213,785
10,661,785
(1,300,791
)
9,360,994
-
Ashton, The
Corona Hills, CA
2,594,264
33,042,398
-
5,966,954
2,594,264
39,009,352
41,603,616
(18,806,334
)
22,797,282
-
Audubon Village
Tampa, FL
3,576,000
26,121,909
-
4,114,611
3,576,000
30,236,520
33,812,520
(13,268,213
)
20,544,307
-
Auvers Village
Orlando, FL
3,808,823
29,322,243
-
6,216,049
3,808,823
35,538,292
39,347,115
(15,974,356
)
23,372,759
-
Avenue Royale
Jacksonville, FL
5,000,000
17,785,388
-
917,456
5,000,000
18,702,844
23,702,844
(4,583,891
)
19,118,953
-
Avon Place, LLC
Avon, CT
1,788,943
12,440,003
-
1,531,391
1,788,943
13,971,394
15,760,337
(4,990,349
)
10,769,988
-
Ball Park Lofts
Denver, CO (G)
5,481,556
51,658,740
-
2,708,015
5,481,556
54,366,755
59,848,311
(12,931,360
)
46,916,951
-
Barrington Place
Oviedo, FL
6,990,000
15,740,825
-
2,533,678
6,990,000
18,274,503
25,264,503
(6,000,104
)
19,264,399
-
Bay Hill
Long Beach, CA
7,600,000
27,437,239
-
740,325
7,600,000
28,177,564
35,777,564
(7,029,980
)
28,747,584
-
Bella Terra I
Mukilteo, WA (G)
5,686,861
26,070,540
-
667,419
5,686,861
26,737,959
32,424,820
(7,277,028
)
25,147,792
-
Bella Vista
Phoenix, AZ
2,978,879
20,641,333
-
3,393,449
2,978,879
24,034,782
27,013,661
(11,641,771
)
15,371,890
-
Bella Vista I, II, III Combined
Woodland Hills, CA
2003-2007
31,682,754
121,095,785
-
1,390,256
31,682,754
122,486,041
154,168,795
(23,933,139
)
130,235,656
-
Belle Arts Condominium Homes, LLC
Bellevue, WA
63,158
248,929
-
(5,320
)
63,158
243,609
306,767
-
306,767
-
Beneva Place
Sarasota, FL
1,344,000
9,665,447
-
1,728,604
1,344,000
11,394,051
12,738,051
(5,284,608
)
7,453,443
-
Berkeley Land
Berkeley, CA
(F)
-
13,908,910
801,101
-
-
13,908,910
801,101
14,710,011
-
14,710,011
-
Bermuda Cove
Jacksonville, FL
1,503,000
19,561,896
-
4,556,127
1,503,000
24,118,023
25,621,023
(11,324,915
)
14,296,108
-
Bishop Park
Winter Park, FL
2,592,000
17,990,436
-
3,646,274
2,592,000
21,636,710
24,228,710
(10,340,427
)
13,888,283
-
Bradford Apartments
Newington, CT
401,091
2,681,210
-
579,531
401,091
3,260,741
3,661,832
(1,301,744
)
2,360,088
-
Briar Knoll Apts
Vernon, CT
928,972
6,209,988
-
1,274,495
928,972
7,484,483
8,413,455
(3,030,004
)
5,383,451
-
Bridford Lakes II
Greensboro, NC
(F)
-
1,100,564
792,509
-
-
1,100,564
792,509
1,893,073
-
1,893,073
-
Bridgewater at Wells Crossing
Orange Park, FL
2,160,000
13,347,549
-
2,010,434
2,160,000
15,357,983
17,517,983
(6,560,719
)
10,957,264
-
Brookside (MD)
Frederick, MD
2,736,000
7,934,069
-
2,157,009
2,736,000
10,091,078
12,827,078
(4,847,243
)
7,979,835
-
Brookside II (MD)
Frederick, MD
2,450,800
6,913,202
-
2,622,214
2,450,800
9,535,416
11,986,216
(4,965,160
)
7,021,056
-
Camellero
Scottsdale, AZ
1,924,900
17,324,593
-
5,445,971
1,924,900
22,770,564
24,695,464
(13,879,083
)
10,816,381
-
Carlyle Mill
Alexandria, VA
10,000,000
51,367,913
-
3,585,927
10,000,000
54,953,840
64,953,840
(15,384,028
)
49,569,812
-
Center Pointe
Beaverton, OR
3,421,535
15,708,853
-
2,605,275
3,421,535
18,314,128
21,735,663
(7,023,656
)
14,712,007
-
Centre Club
Ontario, CA
5,616,000
23,485,891
-
2,576,818
5,616,000
26,062,709
31,678,709
(9,857,007
)
21,821,702
-
Centre Club II
Ontario, CA
1,820,000
9,528,898
-
539,590
1,820,000
10,068,488
11,888,488
(3,186,170
)
8,702,318
-
Chandler Court
Chandler, AZ
1,353,100
12,175,173
-
4,308,670
1,353,100
16,483,843
17,836,943
(9,303,425
)
8,533,518
-
Chandlers Bay
Kent, WA
3,700,000
18,962,585
-
69,473
3,700,000
19,032,058
22,732,058
(2,175,442
)
20,556,616
-
Chatelaine Park
Duluth, GA
1,818,000
24,489,671
-
1,974,089
1,818,000
26,463,760
28,281,760
(11,447,801
)
16,833,959
-
Chesapeake Glen Apts (fka Greentree I, II & III)
Glen Burnie, MD
8,993,411
27,301,052
-
20,936,090
8,993,411
48,237,142
57,230,553
(22,479,872
)
34,750,681
-
S-4
EQUITY RESIDENTIAL
Schedule III - Real Estate and Accumulated Depreciation
December 31, 2010
Cost Capitalized
Subsequent to
Gross Amount Carried
Initial Cost to
Acquisition
at Close of
Description
Company
(Improvements, net) (E)
Period 12/31/10
Date of
Building &
Building &
Building &
Accumulated
Investment in Real
Apartment Name
Location
Construction
Units (H)
Land
Fixtures
Land
Fixtures
Land
Fixtures (A)
Total (B)
Depreciation (C)
Estate, Net at 12/31/10 (B)
Encumbrances
Chestnut Hills
Puyallup, WA
756,300
6,806,635
-
1,360,272
756,300
8,166,907
8,923,207
(4,244,605
)
4,678,602
-
Chickasaw Crossing
Orlando, FL
2,044,000
12,366,832
-
1,786,050
2,044,000
14,152,882
16,196,882
(6,515,656
)
9,681,226
-
Chinatown Gateway
Los Angeles, CA
(F)
-
14,791,831
11,026,473
-
-
14,791,831
11,026,473
25,818,304
-
25,818,304
-
Citrus Falls
Tampa, FL
8,190,000
28,894,280
-
381,158
8,190,000
29,275,438
37,465,438
(5,939,746
)
31,525,692
-
City View (GA)
Atlanta, GA (G)
6,440,800
19,993,460
-
1,256,448
6,440,800
21,249,908
27,690,708
(5,161,465
)
22,529,243
-
Clarys Crossing
Columbia, MD
891,000
15,489,721
-
1,986,718
891,000
17,476,439
18,367,439
(8,016,743
)
10,350,696
-
Cleo, The
Los Angeles, CA
6,615,467
14,829,335
-
3,663,066
6,615,467
18,492,401
25,107,868
(3,530,065
)
21,577,803
-
Club at Tanasbourne
Hillsboro, OR
3,521,300
16,257,934
-
3,046,161
3,521,300
19,304,095
22,825,395
(9,895,369
)
12,930,026
-
Club at the Green
Beaverton, OR
2,030,950
12,616,747
-
2,526,289
2,030,950
15,143,036
17,173,986
(7,815,215
)
9,358,771
-
Coconut Palm Club
Coconut Creek, GA
3,001,700
17,678,928
-
2,525,679
3,001,700
20,204,607
23,206,307
(9,321,082
)
13,885,225
-
Cortona at Dana Park
Mesa, AZ
2,028,939
12,466,128
-
2,413,182
2,028,939
14,879,310
16,908,249
(7,286,220
)
9,622,029
-
Country Gables
Beaverton, OR
1,580,500
14,215,444
-
3,412,313
1,580,500
17,627,757
19,208,257
(9,537,809
)
9,670,448
-
Cove at Boynton Beach I
Boynton Beach, FL
12,600,000
31,469,651
-
2,779,931
12,600,000
34,249,582
46,849,582
(9,526,032
)
37,323,550
-
Cove at Boynton Beach II
Boynton Beach, FL
14,800,000
37,874,719
-
-
14,800,000
37,874,719
52,674,719
(10,138,327
)
42,536,392
-
Cove at Fishers Landing
Vancouver, WA
2,277,000
15,656,887
-
1,152,551
2,277,000
16,809,438
19,086,438
(5,710,162
)
13,376,276
-
Creekside Village
Mountlake Terrace, WA
2,807,600
25,270,594
-
4,629,268
2,807,600
29,899,862
32,707,462
(17,364,294
)
15,343,168
-
Crosswinds
St. Petersburg, FL
1,561,200
5,756,822
-
2,155,601
1,561,200
7,912,423
9,473,623
(4,270,769
)
5,202,854
-
Crown Court
Scottsdale, AZ
3,156,600
28,414,599
-
7,093,468
3,156,600
35,508,067
38,664,667
(17,536,796
)
21,127,871
-
Crowntree Lakes
Orlando, FL
12,009,630
44,407,977
-
128,840
12,009,630
44,536,817
56,546,447
(5,032,304
)
51,514,143
-
Cypress Lake at Waterford
Orlando, FL
7,000,000
27,654,816
-
1,474,998
7,000,000
29,129,814
36,129,814
(7,889,517
)
28,240,297
-
Dartmouth Woods
Lakewood, CO
1,609,800
10,832,754
-
1,964,282
1,609,800
12,797,036
14,406,836
(6,455,552
)
7,951,284
-
Dean Estates
Taunton, MA
498,080
3,329,560
-
622,827
498,080
3,952,387
4,450,467
(1,678,930
)
2,771,537
-
Deerwood (Corona)
Corona, CA
4,742,200
20,272,892
-
3,818,931
4,742,200
24,091,823
28,834,023
(11,726,867
)
17,107,156
-
Defoor Village
Atlanta, GA
2,966,400
10,570,210
-
1,990,444
2,966,400
12,560,654
15,527,054
(5,858,484
)
9,668,570
-
Del Mar Ridge
San Diego, CA
7,801,824
36,948,176
-
2,298,593
7,801,824
39,246,769
47,048,593
(3,116,754
)
43,931,839
-
Desert Homes
Phoenix, AZ
1,481,050
13,390,249
-
4,652,484
1,481,050
18,042,733
19,523,783
(10,220,322
)
9,303,461
-
Eagle Canyon
Chino Hills, CA
1,808,900
16,274,361
-
4,994,045
1,808,900
21,268,406
23,077,306
(10,622,403
)
12,454,903
-
Ellipse at Government Center
Fairfax, VA
19,433,000
56,816,266
-
2,245,450
19,433,000
59,061,716
78,494,716
(7,973,317
)
70,521,399
-
Emerson Place
Boston, MA (G)
14,855,000
57,566,636
-
15,120,573
14,855,000
72,687,209
87,542,209
(36,608,983
)
50,933,226
-
Enclave at Lake Underhill
Orlando, FL
9,359,750
29,539,650
-
1,690,403
9,359,750
31,230,053
40,589,803
(7,327,341
)
33,262,462
-
Enclave at Waterways
Deerfield Beach, FL
15,000,000
33,194,576
-
843,037
15,000,000
34,037,613
49,037,613
(8,268,775
)
40,768,838
-
Enclave at Winston Park
Coconut Creek, FL
5,560,000
19,939,324
-
2,101,199
5,560,000
22,040,523
27,600,523
(7,511,989
)
20,088,534
-
Enclave, The
Tempe, AZ
1,500,192
19,281,399
-
1,333,483
1,500,192
20,614,882
22,115,074
(9,498,305
)
12,616,769
-
Estates at Phipps
Atlanta, GA
9,360,000
29,705,236
-
3,780,696
9,360,000
33,485,932
42,845,932
(9,625,684
)
33,220,248
-
Estates at Wellington Green
Wellington, FL
20,000,000
64,790,850
-
1,719,926
20,000,000
66,510,776
86,510,776
(15,486,015
)
71,024,761
-
Fairland Gardens
Silver Spring, MD
6,000,000
19,972,183
-
5,994,235
6,000,000
25,966,418
31,966,418
(12,839,143
)
19,127,275
-
Four Winds
Fall River, MA
1,370,843
9,163,804
-
1,961,290
1,370,843
11,125,094
12,495,937
(4,317,329
)
8,178,608
-
Fox Hill Apartments
Enfield, CT
1,129,018
7,547,256
-
1,410,030
1,129,018
8,957,286
10,086,304
(3,473,400
)
6,612,904
-
Fox Run (WA)
Federal Way, WA
626,637
5,765,018
-
1,644,476
626,637
7,409,494
8,036,131
(4,492,269
)
3,543,862
-
Fox Run II (WA)
Federal Way, WA
80,000
1,286,139
-
53,086
80,000
1,339,225
1,419,225
(389,957
)
1,029,268
-
Gables Grand Plaza
Coral Gables, FL (G)
-
44,601,000
-
3,174,122
-
47,775,122
47,775,122
(12,598,590
)
35,176,532
-
Gallery, The
Hermosa Beach, CA
18,144,000
46,567,941
-
1,719,605
18,144,000
48,287,546
66,431,546
(9,535,678
)
56,895,868
-
Gatehouse at Pine Lake
Pembroke Pines, FL
1,896,600
17,070,795
-
3,174,037
1,896,600
20,244,832
22,141,432
(10,411,240
)
11,730,192
-
Gatehouse on the Green
Plantation, FL
2,228,200
20,056,270
-
6,485,962
2,228,200
26,542,232
28,770,432
(12,580,475
)
16,189,957
-
Gates of Redmond
Redmond, WA
2,306,100
12,064,015
-
4,624,741
2,306,100
16,688,756
18,994,856
(7,467,775
)
11,527,081
-
Gatewood
Pleasanton, CA
6,796,511
20,249,392
-
3,558,873
6,796,511
23,808,265
30,604,776
(6,922,485
)
23,682,291
-
Governors Green
Bowie, MD
19,845,000
73,335,916
-
513,833
19,845,000
73,849,749
93,694,749
(10,600,450
)
83,094,299
-
Greenfield Village
Rocky Hill , CT
911,534
6,093,418
-
623,523
911,534
6,716,941
7,628,475
(2,669,219
)
4,959,256
-
S-5
EQUITY RESIDENTIAL
Schedule III - Real Estate and Accumulated Depreciation
December 31, 2010
Cost Capitalized
Subsequent to
Gross Amount Carried
Initial Cost to
Acquisition
at Close of
Description
Company
(Improvements, net) (E)
Period 12/31/10
Date of
Building &
Building &
Building &
Accumulated
Investment in Real
Apartment Name
Location
Construction
Units (H)
Land
Fixtures
Land
Fixtures
Land
Fixtures (A)
Total (B)
Depreciation (C)
Estate, Net at 12/31/10 (B)
Encumbrances
Greenhouse - Roswell
Roswell, GA
1,220,000
10,974,727
-
2,862,866
1,220,000
13,837,593
15,057,593
(8,334,268
)
6,723,325
-
Hamilton Villas
Beverly Hills, CA
7,772,000
16,864,269
-
1,197,789
7,772,000
18,062,058
25,834,058
(2,088,921
)
23,745,137
-
Hammocks Place
Miami, FL
319,180
12,513,467
-
3,361,988
319,180
15,875,455
16,194,635
(9,682,288
)
6,512,347
-
Hampshire Place
Los Angeles, CA
10,806,000
30,335,330
-
1,855,750
10,806,000
32,191,080
42,997,080
(8,142,603
)
34,854,477
-
Hamptons
Puyallup, WA
1,119,200
10,075,844
-
1,812,434
1,119,200
11,888,278
13,007,478
(6,014,780
)
6,992,698
-
Heritage Ridge
Lynwood, WA
6,895,000
18,983,597
-
492,899
6,895,000
19,476,496
26,371,496
(5,168,705
)
21,202,791
-
Heritage, The
Phoenix, AZ
1,209,705
13,136,903
-
1,360,019
1,209,705
14,496,922
15,706,627
(6,803,317
)
8,903,310
-
Heron Pointe
Boynton Beach, FL
1,546,700
7,774,676
-
1,923,892
1,546,700
9,698,568
11,245,268
(5,039,618
)
6,205,650
-
High Meadow
Ellington, CT
583,679
3,901,774
-
756,263
583,679
4,658,037
5,241,716
(1,793,920
)
3,447,796
-
Highland Glen
Westwood, MA
2,229,095
16,828,153
-
2,239,543
2,229,095
19,067,696
21,296,791
(7,067,157
)
14,229,634
-
Highland Glen II
Westwood, MA
-
19,875,857
-
80,545
-
19,956,402
19,956,402
(2,819,615
)
17,136,787
-
Highlands at South Plainfield
South Plainfield, NJ
10,080,000
37,526,912
-
733,896
10,080,000
38,260,808
48,340,808
(7,925,678
)
40,415,130
-
Highlands, The
Scottsdale, AZ
11,823,840
31,990,970
-
2,805,757
11,823,840
34,796,727
46,620,567
(7,688,227
)
38,932,340
-
Hudson Crossing
New York, NY (G)
23,420,000
70,086,976
-
748,402
23,420,000
70,835,378
94,255,378
(16,184,367
)
78,071,011
-
Hudson Pointe
Jersey City, NJ
5,148,500
41,149,117
-
1,048,724
5,148,500
42,197,841
47,346,341
(10,223,470
)
37,122,871
-
Hunt Club II
Charlotte, NC
(F)
-
100,000
-
-
-
100,000
-
100,000
-
100,000
-
Huntington Park
Everett, WA
1,597,500
14,367,864
-
3,620,694
1,597,500
17,988,558
19,586,058
(10,893,191
)
8,692,867
-
Indian Bend
Scottsdale, AZ
1,075,700
9,800,330
-
3,042,609
1,075,700
12,842,939
13,918,639
(8,082,539
)
5,836,100
-
Iron Horse Park
Pleasant Hill, CA
15,000,000
24,335,549
-
7,755,418
15,000,000
32,090,967
47,090,967
(8,103,335
)
38,987,632
-
Isle at Arrowhead Ranch
Glendale, AZ
1,650,237
19,593,123
-
1,660,272
1,650,237
21,253,395
22,903,632
(9,860,515
)
13,043,117
-
Kempton Downs
Gresham, OR
1,217,349
10,943,372
-
2,838,147
1,217,349
13,781,519
14,998,868
(7,994,662
)
7,004,206
-
Kenwood Mews
Burbank, CA
14,100,000
24,662,883
-
1,627,860
14,100,000
26,290,743
40,390,743
(5,165,397
)
35,225,346
-
Key Isle at Windermere
Ocoee, FL
8,460,000
31,761,470
-
1,197,975
8,460,000
32,959,445
41,419,445
(7,409,728
)
34,009,717
-
Key Isle at Windermere II
Ocoee, FL
3,306,286
24,519,643
-
21,547
3,306,286
24,541,190
27,847,476
(2,038,084
)
25,809,392
-
Kings Colony (FL)
Miami, FL
19,200,000
48,379,586
-
2,692,770
19,200,000
51,072,356
70,272,356
(12,387,179
)
57,885,177
-
La Mirage
San Diego, CA
1988/1992
1,070
28,895,200
95,567,943
-
13,968,700
28,895,200
109,536,643
138,431,843
(51,916,782
)
86,515,061
-
La Mirage IV
San Diego, CA
6,000,000
47,449,353
-
2,944,380
6,000,000
50,393,733
56,393,733
(16,239,415
)
40,154,318
-
Laguna Clara
Santa Clara, CA
13,642,420
29,707,475
-
3,329,323
13,642,420
33,036,798
46,679,218
(9,100,501
)
37,578,717
-
Lake Buena Vista Combined
Orlando, FL
2000/2002
23,520,000
75,068,206
-
3,594,116
23,520,000
78,662,322
102,182,322
(17,301,402
)
84,880,920
-
Landings at Pembroke Lakes
Pembroke Pines, FL
17,900,000
24,460,989
-
4,881,752
17,900,000
29,342,741
47,242,741
(7,519,945
)
39,722,796
-
Landings at Port Imperial
W. New York, NJ
27,246,045
37,741,050
-
6,567,661
27,246,045
44,308,711
71,554,756
(15,348,539
)
56,206,217
-
Las Colinas at Black Canyon
Phoenix, AZ
9,000,000
35,917,811
-
115,519
9,000,000
36,033,330
45,033,330
(4,435,319
)
40,598,011
-
Legacy at Highlands Ranch
Highlands Ranch, CO
6,330,000
37,557,013
-
1,466,728
6,330,000
39,023,741
45,353,741
(9,805,338
)
35,548,403
-
Legacy Park Central
Concord, CA
6,469,230
46,745,854
-
295,479
6,469,230
47,041,333
53,510,563
(10,789,289
)
42,721,274
-
Lexington Farm
Alpharetta, GA
3,521,900
22,888,305
-
2,476,212
3,521,900
25,364,517
28,886,417
(11,200,145
)
17,686,272
-
Lexington Park
Orlando, FL
2,016,000
12,346,726
-
2,450,467
2,016,000
14,797,193
16,813,193
(7,062,512
)
9,750,681
-
Little Cottonwoods
Tempe, AZ
3,050,133
26,991,689
-
3,737,391
3,050,133
30,729,080
33,779,213
(14,499,829
)
19,279,384
-
Longacre House
New York, NY (G)
73,170,045
53,962,510
-
125,953
73,170,045
54,088,463
127,258,508
(7,505,448
)
119,753,060
-
Longfellow Place
Boston, MA (G)
53,164,160
183,940,619
-
47,318,604
53,164,160
231,259,223
284,423,383
(97,449,615
)
186,973,768
-
Longwood
Decatur, GA
1,454,048
13,087,393
-
2,002,602
1,454,048
15,089,995
16,544,043
(8,825,354
)
7,718,689
-
Madison, The
Alexandria, VA
(F)
-
15,261,108
1,080,330
-
-
15,261,108
1,080,330
16,341,438
-
16,341,438
-
Marbrisa
Tampa, FL
2,240,000
7,183,561
-
79,738
2,240,000
7,263,299
9,503,299
(1,234,564
)
8,268,735
-
Mariners Wharf
Orange Park, FL
1,861,200
16,744,951
-
3,244,046
1,861,200
19,988,997
21,850,197
(9,702,938
)
12,147,259
-
Market Street Landing
Seattle, WA
(F)
-
12,542,418
297,637
-
-
12,542,418
297,637
12,840,055
-
12,840,055
-
Marquessa
Corona Hills, CA
6,888,500
21,604,584
-
2,726,408
6,888,500
24,330,992
31,219,492
(11,834,160
)
19,385,332
-
Martha Lake
Lynnwood, WA
821,200
7,405,070
-
1,985,277
821,200
9,390,347
10,211,547
(4,980,064
)
5,231,483
-
Martine, The
Bellevue, WA
3,200,000
9,616,264
-
2,642,670
3,200,000
12,258,934
15,458,934
(1,957,800
)
13,501,134
-
Merritt at Satellite Place
Duluth, GA
3,400,000
30,115,674
-
2,440,228
3,400,000
32,555,902
35,955,902
(13,072,220
)
22,883,682
-
S-6
EQUITY RESIDENTIAL
Schedule III - Real Estate and Accumulated Depreciation
December 31, 2010
Cost Capitalized
Subsequent to
Gross Amount Carried
Initial Cost to
Acquisition
at Close of
Description
Company
(Improvements, net) (E)
Period 12/31/10
Date of
Building &
Building &
Building &
Accumulated
Investment in Real
Apartment Name
Location
Construction
Units (H)
Land
Fixtures
Land
Fixtures
Land
Fixtures (A)
Total (B)
Depreciation (C)
Estate, Net at 12/31/10 (B)
Encumbrances
Mill Pond
Millersville, MD
2,880,000
8,468,014
-
2,718,776
2,880,000
11,186,790
14,066,790
(5,505,405
)
8,561,385
-
Mira Flores
Palm Beach Gardens, FL
7,039,313
22,515,299
-
2,298,916
7,039,313
24,814,215
31,853,528
(8,485,263
)
23,368,265
-
Mission Bay
Orlando, FL
2,432,000
21,623,560
-
2,717,235
2,432,000
24,340,795
26,772,795
(10,820,242
)
15,952,553
-
Mission Verde, LLC
San Jose, CA
5,190,700
9,679,109
-
3,151,242
5,190,700
12,830,351
18,021,051
(5,623,277
)
12,397,774
-
Morningside
Scottsdale, AZ
670,470
12,607,976
-
1,697,299
670,470
14,305,275
14,975,745
(6,740,861
)
8,234,884
-
Mosaic at Largo Station
Hyattsville, MD
4,120,800
42,477,297
-
237,451
4,120,800
42,714,748
46,835,548
(4,141,764
)
42,693,784
-
Mozaic at Union Station
Los Angeles, CA
8,500,000
52,583,270
-
668,419
8,500,000
53,251,689
61,751,689
(8,972,618
)
52,779,071
-
New River Cove
Davie, FL
15,800,000
46,142,895
-
1,049,654
15,800,000
47,192,549
62,992,549
(10,341,684
)
52,650,865
-
Northampton 1
Largo, MD
1,843,200
17,528,381
-
5,798,143
1,843,200
23,326,524
25,169,724
(14,229,754
)
10,939,970
-
Northampton 2
Largo, MD
1,513,500
14,246,990
-
3,654,124
1,513,500
17,901,114
19,414,614
(10,571,731
)
8,842,883
-
Northglen
Valencia, CA
9,360,000
20,778,553
-
1,728,818
9,360,000
22,507,371
31,867,371
(8,256,285
)
23,611,086
-
Northlake (MD)
Germantown, MD
15,000,000
23,142,302
-
9,754,730
15,000,000
32,897,032
47,897,032
(9,909,101
)
37,987,931
-
Northridge
Pleasant Hill, CA
5,527,800
14,691,705
-
8,471,887
5,527,800
23,163,592
28,691,392
(9,697,063
)
18,994,329
-
Oak Park North
Agoura Hills, CA
1,706,900
15,362,666
-
2,806,978
1,706,900
18,169,644
19,876,544
(9,627,790
)
10,248,754
-
Oak Park South
Agoura Hills, CA
1,683,800
15,154,608
-
2,923,629
1,683,800
18,078,237
19,762,037
(9,624,230
)
10,137,807
-
Oaks at Falls Church
Falls Church, VA
20,240,000
20,152,616
-
3,552,434
20,240,000
23,705,050
43,945,050
(5,665,262
)
38,279,788
-
Ocean Crest
Solana Beach, CA
5,111,200
11,910,438
-
2,058,043
5,111,200
13,968,481
19,079,681
(6,514,987
)
12,564,694
-
Ocean Walk
Key West, FL
2,838,749
25,545,009
-
3,233,758
2,838,749
28,778,767
31,617,516
(13,599,381
)
18,018,135
-
Olympus Towers
Seattle, WA (G)
14,752,034
73,335,425
-
2,226,097
14,752,034
75,561,522
90,313,556
(19,377,834
)
70,935,722
-
Orchard Ridge
Lynnwood, WA
480,600
4,372,033
-
1,127,901
480,600
5,499,934
5,980,534
(3,295,398
)
2,685,136
-
Overlook Manor
Frederick, MD
1980/1985
1,299,100
3,930,931
-
2,142,057
1,299,100
6,072,988
7,372,088
(3,277,788
)
4,094,300
-
Overlook Manor II
Frederick, MD
1980/1985
2,186,300
6,262,597
-
1,253,022
2,186,300
7,515,619
9,701,919
(3,549,205
)
6,152,714
-
Paces Station
Atlanta, GA
1984-1989
4,801,500
32,548,053
-
8,202,985
4,801,500
40,751,038
45,552,538
(20,808,476
)
24,744,062
-
Palm Trace Landings
Davie, FL
38,400,000
105,693,432
-
2,605,905
38,400,000
108,299,337
146,699,337
(23,469,327
)
123,230,010
-
Panther Ridge
Federal Way, WA
1,055,800
9,506,117
-
1,846,801
1,055,800
11,352,918
12,408,718
(5,866,485
)
6,542,233
-
Parc 77
New York, NY (G)
40,504,000
18,025,679
-
4,115,467
40,504,000
22,141,146
62,645,146
(4,773,963
)
57,871,183
-
Parc Cameron
New York, NY (G)
37,600,000
9,855,597
-
5,120,583
37,600,000
14,976,180
52,576,180
(3,867,865
)
48,708,315
-
Parc Coliseum
New York, NY (G)
52,654,000
23,045,751
-
6,947,750
52,654,000
29,993,501
82,647,501
(6,372,704
)
76,274,797
-
Park at Turtle Run, The
Coral Springs, FL
15,420,000
36,064,629
-
898,823
15,420,000
36,963,452
52,383,452
(9,407,101
)
42,976,351
-
Park West (CA)
Los Angeles, CA
1987/1990
3,033,500
27,302,383
-
5,418,219
3,033,500
32,720,602
35,754,102
(17,933,416
)
17,820,686
-
Parkside
Union City, CA
6,246,700
11,827,453
-
3,310,231
6,246,700
15,137,684
21,384,384
(7,795,045
)
13,589,339
-
Parkview Terrace
Redlands, CA
4,969,200
35,653,777
-
11,282,338
4,969,200
46,936,115
51,905,315
(22,196,279
)
29,709,036
-
Phillips Park
Wellesley, MA
816,922
5,460,955
-
936,091
816,922
6,397,046
7,213,968
(2,475,515
)
4,738,453
-
Pine Harbour
Orlando, FL
1,664,300
14,970,915
-
3,529,258
1,664,300
18,500,173
20,164,473
(11,225,249
)
8,939,224
-
Playa Pacifica
Hermosa Beach,CA
35,100,000
33,473,822
-
7,145,521
35,100,000
40,619,343
75,719,343
(10,641,111
)
65,078,232
-
Pointe at South Mountain
Phoenix, AZ
2,228,800
20,059,311
-
3,210,958
2,228,800
23,270,269
25,499,069
(11,847,168
)
13,651,901
-
Polos East
Orlando, FL
1,386,000
19,058,620
-
2,188,231
1,386,000
21,246,851
22,632,851
(9,567,266
)
13,065,585
-
Port Royale
Ft. Lauderdale, FL (G)
1,754,200
15,789,873
-
7,514,240
1,754,200
23,304,113
25,058,313
(12,612,882
)
12,445,431
-
Port Royale II
Ft. Lauderdale, FL (G)
1,022,200
9,203,166
-
4,702,265
1,022,200
13,905,431
14,927,631
(7,140,443
)
7,787,188
-
Port Royale III
Ft. Lauderdale, FL (G)
7,454,900
14,725,802
-
8,935,675
7,454,900
23,661,477
31,116,377
(11,497,857
)
19,618,520
-
Port Royale IV
Ft. Lauderdale, FL
(F)
-
-
387,471
-
-
-
387,471
387,471
-
387,471
-
Portofino
Chino Hills, CA
3,572,400
14,660,994
-
2,150,998
3,572,400
16,811,992
20,384,392
(7,854,366
)
12,530,026
-
Portofino (Val)
Valencia, CA
8,640,000
21,487,126
-
2,302,820
8,640,000
23,789,946
32,429,946
(8,794,584
)
23,635,362
-
Portside Towers
Jersey City, NJ (G)
1992-1997
22,487,006
96,842,913
-
14,773,378
22,487,006
111,616,291
134,103,297
(47,349,520
)
86,753,777
-
Preserve at Deer Creek
Deerfield Beach, FL
13,500,000
60,011,208
-
3,069,187
13,500,000
63,080,395
76,580,395
(16,723,806
)
59,856,589
-
Prime, The
Arlington, VA
32,000,000
64,436,539
-
587,595
32,000,000
65,024,134
97,024,134
(12,202,034
)
84,822,100
-
Promenade at Aventura
Aventura, FL
13,320,000
30,353,748
-
4,740,072
13,320,000
35,093,820
48,413,820
(12,325,089
)
36,088,731
-
Promenade at Town Center I
Valencia, CA
14,700,000
35,390,279
-
2,762,304
14,700,000
38,152,583
52,852,583
(10,327,370
)
42,525,213
-
S-7
EQUITY RESIDENTIAL
Schedule III - Real Estate and Accumulated Depreciation
December 31, 2010
Cost Capitalized
Subsequent to
Gross Amount Carried
Initial Cost to
Acquisition
at Close of
Description
Company
(Improvements, net) (E)
Period 12/31/10
Date of
Building &
Building &
Building &
Accumulated
Investment in Real
Apartment Name
Location
Construction
Units (H)
Land
Fixtures
Land
Fixtures
Land
Fixtures (A)
Total (B)
Depreciation (C)
Estate, Net at 12/31/10 (B)
Encumbrances
Promenade at Wyndham Lakes
Coral Springs, FL
6,640,000
26,743,760
-
3,364,705
6,640,000
30,108,465
36,748,465
(10,964,932
)
25,783,533
-
Promenade Terrace
Corona, CA
2,272,800
20,546,289
-
4,744,546
2,272,800
25,290,835
27,563,635
(13,575,380
)
13,988,255
-
Promontory Pointe I & II
Phoenix, AZ
1984/1996
2,355,509
30,421,840
-
3,698,629
2,355,509
34,120,469
36,475,978
(16,314,043
)
20,161,935
-
Prospect Towers
Hackensack, NJ
3,926,600
31,738,452
-
2,938,287
3,926,600
34,676,739
38,603,339
(13,635,911
)
24,967,428
-
Prospect Towers II
Hackensack, NJ
4,500,000
33,104,733
-
2,070,180
4,500,000
35,174,913
39,674,913
(10,813,863
)
28,861,050
-
Ravens Crest
Plainsboro, NJ
4,670,850
42,080,642
-
11,945,748
4,670,850
54,026,390
58,697,240
(31,532,339
)
27,164,901
-
Redmond Ridge
Redmond, WA
6,975,705
46,175,001
-
73,615
6,975,705
46,248,616
53,224,321
(4,628,114
)
48,596,207
-
Red 160 (fka Redmond Way)
Redmond, WA (G)
(F)
-
15,546,376
61,417,903
-
9,488
15,546,376
61,427,391
76,973,767
(339
)
76,973,428
-
Regency Palms
Huntington Beach, CA
1,857,400
16,713,254
-
4,433,614
1,857,400
21,146,868
23,004,268
(11,462,162
)
11,542,106
-
Regency Park
Centreville, VA
2,521,500
16,200,666
-
7,802,524
2,521,500
24,003,190
26,524,690
(11,693,111
)
14,831,579
-
Registry
Northglenn, CO
2,000,000
10,926,759
-
48,337
2,000,000
10,975,096
12,975,096
(1,278,875
)
11,696,221
-
Remington Place
Phoenix, AZ
1,492,750
13,377,478
-
4,637,494
1,492,750
18,014,972
19,507,722
(10,299,256
)
9,208,466
-
Renaissance Villas
Berkeley, CA (G)
2,458,000
4,542,000
-
5,418
2,458,000
4,547,418
7,005,418
(332,879
)
6,672,539
-
Reserve at Ashley Lake
Boynton Beach, FL
3,520,400
23,332,494
-
4,721,183
3,520,400
28,053,677
31,574,077
(13,452,026
)
18,122,051
-
Reserve at Town Center
Loudon, VA
3,144,056
27,669,121
-
712,324
3,144,056
28,381,445
31,525,501
(7,401,808
)
24,123,693
-
Reserve at Town Center II (WA)
Mill Creek, WA
4,310,417
17,172,642
-
7,133
4,310,417
17,179,775
21,490,192
(614,973
)
20,875,219
-
Reserve at Town Center III
Mill Creek, WA
(F)
-
2,089,388
220,235
-
-
2,089,388
220,235
2,309,623
-
2,309,623
-
Retreat, The
Phoenix, AZ
3,475,114
27,265,252
-
2,380,882
3,475,114
29,646,134
33,121,248
(12,339,194
)
20,782,054
-
Rianna I
Seattle, WA (G)
2,268,160
14,864,482
-
84,986
2,268,160
14,949,468
17,217,628
(1,125,268
)
16,092,360
-
Ridgewood Village I&II
San Diego, CA
11,809,500
34,004,048
-
2,195,996
11,809,500
36,200,044
48,009,544
(14,118,993
)
33,890,551
-
River Pointe at Den Rock Park
Lawrence, MA
4,615,702
18,440,147
-
1,212,909
4,615,702
19,653,056
24,268,758
(6,078,818
)
18,189,940
-
River Tower
New York, NY (G)
118,669,441
98,880,559
-
401,052
118,669,441
99,281,611
217,951,052
(12,970,964
)
204,980,088
-
Rivers Bend (CT)
Windsor, CT
3,325,517
22,573,826
-
2,724,959
3,325,517
25,298,785
28,624,302
(9,670,355
)
18,953,947
-
Riverview Condominiums
Norwalk, CT
2,300,000
7,406,730
-
1,806,846
2,300,000
9,213,576
11,513,576
(4,117,696
)
7,395,880
-
Royal Oaks (FL)
Jacksonville, FL
1,988,000
13,645,117
-
3,882,711
1,988,000
17,527,828
19,515,828
(7,780,869
)
11,734,959
-
Sabal Palm at Carrollwood Place
Tampa, FL
3,888,000
26,911,542
-
2,533,589
3,888,000
29,445,131
33,333,131
(12,979,307
)
20,353,824
-
Sabal Palm at Lake Buena Vista
Orlando, FL
2,800,000
23,687,893
-
3,982,057
2,800,000
27,669,950
30,469,950
(12,197,653
)
18,272,297
-
Sabal Palm at Metrowest
Orlando, FL
4,110,000
38,394,865
-
3,876,633
4,110,000
42,271,498
46,381,498
(18,443,292
)
27,938,206
-
Sabal Palm at Metrowest II
Orlando, FL
4,560,000
33,907,283
-
2,691,106
4,560,000
36,598,389
41,158,389
(15,830,427
)
25,327,962
-
Sabal Pointe
Coral Springs, FL
1,951,600
17,570,508
-
3,961,145
1,951,600
21,531,653
23,483,253
(11,635,146
)
11,848,107
-
Saddle Ridge
Ashburn, VA
1,364,800
12,283,616
-
2,201,030
1,364,800
14,484,646
15,849,446
(7,934,560
)
7,914,886
-
Sage
Everett, WA
2,500,000
12,021,256
-
412,814
2,500,000
12,434,070
14,934,070
(2,576,867
)
12,357,203
-
Savannah at Park Place
Atlanta, GA
7,696,095
34,114,542
-
2,628,399
7,696,095
36,742,941
44,439,036
(10,138,404
)
34,300,632
-
Savoy III
Aurora, CO
(F)
-
659,165
4,749,723
-
-
659,165
4,749,723
5,408,888
-
5,408,888
-
Sawgrass Cove
Bradenton, FL
3,360,000
12,587,189
-
80,974
3,360,000
12,668,163
16,028,163
(1,947,404
)
14,080,759
-
Scarborough Square
Rockville, MD
1,815,000
7,608,126
-
2,394,761
1,815,000
10,002,887
11,817,887
(4,923,278
)
6,894,609
-
Sedona Ridge
Phoenix, AZ
3,750,000
14,750,000
-
254,926
3,750,000
15,004,926
18,754,926
(2,039,282
)
16,715,644
-
Seeley Lake
Lakewood, WA
2,760,400
24,845,286
-
4,006,480
2,760,400
28,851,766
31,612,166
(14,437,537
)
17,174,629
-
Seventh & James
Seattle, WA
663,800
5,974,803
-
2,878,988
663,800
8,853,791
9,517,591
(4,849,519
)
4,668,072
-
Shadow Creek
Winter Springs, FL
6,000,000
21,719,768
-
1,434,843
6,000,000
23,154,611
29,154,611
(6,340,966
)
22,813,645
-
Sheridan Lake Club
Dania Beach, FL
12,000,000
23,170,580
-
1,252,843
12,000,000
24,423,423
36,423,423
(5,113,176
)
31,310,247
-
Sheridan Ocean Club combined
Dania Beach, FL
18,313,414
47,091,593
-
14,017,392
18,313,414
61,108,985
79,422,399
(21,027,176
)
58,395,223
-
Siena Terrace
Lake Forest, CA
8,900,000
24,083,024
-
2,738,600
8,900,000
26,821,624
35,721,624
(11,637,233
)
24,084,391
-
Silver Springs (FL)
Jacksonville, FL
1,831,100
16,474,735
-
5,779,723
1,831,100
22,254,458
24,085,558
(12,404,671
)
11,680,887
-
Skycrest
Valencia, CA
10,560,000
25,574,457
-
1,870,144
10,560,000
27,444,601
38,004,601
(10,001,263
)
28,003,338
-
Skylark
Union City, CA
1,781,600
16,731,916
-
1,608,125
1,781,600
18,340,041
20,121,641
(8,137,578
)
11,984,063
-
Skyline Terrace
Burlingame, CA
1967/1987
16,836,000
35,414,000
-
16,836,000
35,414,469
52,250,469
(227,411
)
52,023,058
-
Skyline Towers
Falls Church, VA (G)
78,278,200
91,485,591
-
27,969,652
78,278,200
119,455,243
197,733,443
(30,881,457
)
166,851,986
-
S-8
EQUITY RESIDENTIAL
Schedule III - Real Estate and Accumulated Depreciation
December 31, 2010
Cost Capitalized
Subsequent to
Gross Amount Carried
Initial Cost to
Acquisition
at Close of
Description
Company
(Improvements, net) (E)
Period 12/31/10
Date of
Building &
Building &
Building &
Accumulated
Investment in Real
Apartment Name
Location
Construction
Units (H)
Land
Fixtures
Land
Fixtures
Land
Fixtures (A)
Total (B)
Depreciation (C)
Estate, Net at 12/31/10 (B)
Encumbrances
Skyview
Rancho Santa Margarita, CA
3,380,000
21,952,863
-
1,667,929
3,380,000
23,620,792
27,000,792
(9,657,421
)
17,343,371
-
Sonoran
Phoenix, AZ
2,361,922
31,841,724
-
2,900,306
2,361,922
34,742,030
37,103,952
(16,082,432
)
21,021,520
-
Southwood
Palo Alto, CA
6,936,600
14,324,069
-
2,065,301
6,936,600
16,389,370
23,325,970
(7,489,798
)
15,836,172
-
Springbrook Estates
Riverside, CA
(F)
-
18,200,000
-
-
-
18,200,000
-
18,200,000
-
18,200,000
-
St. Andrews at Winston Park
Coconut Creek, FL
5,680,000
19,812,090
-
2,144,175
5,680,000
21,956,265
27,636,265
(7,512,645
)
20,123,620
-
Stoney Creek
Lakewood, WA
1,215,200
10,938,134
-
2,267,480
1,215,200
13,205,614
14,420,814
(6,703,659
)
7,717,155
-
Summerwood
Hayward, CA
4,810,644
6,942,743
-
2,132,610
4,810,644
9,075,353
13,885,997
(4,231,400
)
9,654,597
-
Summit & Birch Hill
Farmington, CT
1,757,438
11,748,112
-
2,916,135
1,757,438
14,664,247
16,421,685
(5,733,897
)
10,687,788
-
Summit at Lake Union
Seattle, WA
1995 -1997
1,424,700
12,852,461
-
3,097,192
1,424,700
15,949,653
17,374,353
(7,701,759
)
9,672,594
-
Surprise Lake Village
Milton, WA
4,162,543
21,995,958
-
167,483
4,162,543
22,163,441
26,325,984
(2,484,576
)
23,841,408
-
Sycamore Creek
Scottsdale, AZ
3,152,000
19,083,727
-
3,055,695
3,152,000
22,139,422
25,291,422
(10,946,251
)
14,345,171
-
Tanasbourne Terrace
Hillsboro, OR
1986-1989
1,876,700
16,891,205
-
3,764,711
1,876,700
20,655,916
22,532,616
(12,425,399
)
10,107,217
-
Third Square
Cambridge, MA (G)
2008/2009
27,812,384
228,734,105
-
567,932
27,812,384
229,302,037
257,114,421
(15,770,134
)
241,344,287
-
Tortuga Bay
Orlando, FL
6,280,000
32,121,779
-
985,669
6,280,000
33,107,448
39,387,448
(7,923,623
)
31,463,825
-
Toscana
Irvine, CA
1991/1993
39,410,000
50,806,072
-
6,395,983
39,410,000
57,202,055
96,612,055
(21,654,115
)
74,957,940
-
Townes at Herndon
Herndon, VA
10,900,000
49,216,125
-
576,648
10,900,000
49,792,773
60,692,773
(10,492,949
)
50,199,824
-
Trump Place, 140 Riverside
New York, NY (G)
103,539,100
94,082,725
-
1,245,121
103,539,100
95,327,846
198,866,946
(20,098,341
)
178,768,605
-
Trump Place, 160 Riverside
New York, NY (G)
139,933,500
190,964,745
-
4,193,547
139,933,500
195,158,292
335,091,792
(39,008,991
)
296,082,801
-
Trump Place, 180 Riverside
New York, NY (G)
144,968,250
138,346,681
-
5,245,129
144,968,250
143,591,810
288,560,060
(30,420,203
)
258,139,857
-
Uwajimaya Village
Seattle, WA
8,800,000
22,188,288
-
231,285
8,800,000
22,419,573
31,219,573
(5,828,856
)
25,390,717
-
Valencia Plantation
Orlando, FL
873,000
12,819,377
-
2,124,405
873,000
14,943,782
15,816,782
(6,429,174
)
9,387,608
-
Vantage Pointe
San Diego, CA (G)
9,403,960
190,596,040
-
878,314
9,403,960
191,474,354
200,878,314
(2,779,752
)
198,098,562
-
Versailles (K-Town)
Los Angeles, CA
10,590,975
44,409,025
-
17,858
10,590,975
44,426,883
55,017,858
(2,028,003
)
52,989,855
-
Victor on Venice
Los Angeles, CA (G)
10,350,000
35,433,437
-
105,588
10,350,000
35,539,025
45,889,025
(6,273,594
)
39,615,431
-
Villa Encanto
Phoenix, AZ
2,884,447
22,197,363
-
3,530,421
2,884,447
25,727,784
28,612,231
(12,649,439
)
15,962,792
-
Villa Solana
Laguna Hills, CA
1,665,100
14,985,678
-
6,271,253
1,665,100
21,256,931
22,922,031
(12,286,928
)
10,635,103
-
Village at Bear Creek
Lakewood, CO
4,519,700
40,676,390
-
4,115,836
4,519,700
44,792,226
49,311,926
(21,310,226
)
28,001,700
-
Vista Del Largo
Mission Viejo, CA
1986-1988
4,525,800
40,736,293
-
10,948,915
4,525,800
51,685,208
56,211,008
(30,191,450
)
26,019,558
-
Vista Grove
Mesa, AZ
1997/1998
1,341,796
12,157,045
-
1,295,291
1,341,796
13,452,336
14,794,132
(6,225,002
)
8,569,130
-
Vista Montana - Residential & Townhomes
San Jose, CA
(F)
-
51,000,000
-
-
-
51,000,000
-
51,000,000
-
51,000,000
-
Vista on Courthouse
Arlington, VA
15,550,260
69,449,740
-
86,777
15,550,260
69,536,517
85,086,777
(5,267,387
)
79,819,390
-
Waterford at Deerwood
Jacksonville, FL
1,496,913
10,659,702
-
3,584,784
1,496,913
14,244,486
15,741,399
(6,711,046
)
9,030,353
-
Waterford at Orange Park
Orange Park, FL
1,960,000
12,098,784
-
2,967,016
1,960,000
15,065,800
17,025,800
(7,417,680
)
9,608,120
-
Waterford Place (CO)
Thornton, CO
5,040,000
29,946,419
-
1,310,833
5,040,000
31,257,252
36,297,252
(9,793,049
)
26,504,203
-
Waterside
Reston, VA
20,700,000
27,474,388
-
7,638,031
20,700,000
35,112,419
55,812,419
(9,030,796
)
46,781,623
-
Webster Green
Needham, MA
1,418,893
9,485,006
-
1,000,811
1,418,893
10,485,817
11,904,710
(3,879,487
)
8,025,223
-
Welleby Lake Club
Sunrise, FL
3,648,000
17,620,879
-
3,744,103
3,648,000
21,364,982
25,012,982
(9,435,056
)
15,577,926
-
West End Apartments (fka Emerson Place/CRP II)
Boston, MA (G)
469,546
163,123,022
-
358,369
469,546
163,481,391
163,950,937
(15,522,448
)
148,428,489
-
Westerly at Worldgate
Herndon, VA
14,568,000
43,620,057
-
1,062,632
14,568,000
44,682,689
59,250,689
(6,046,012
)
53,204,677
-
Westfield Village
Centerville, VA
7,000,000
23,245,834
-
4,574,728
7,000,000
27,820,562
34,820,562
(8,289,817
)
26,530,745
-
Westridge
Tacoma, WA
1987 -1991
3,501,900
31,506,082
-
6,551,697
3,501,900
38,057,779
41,559,679
(19,228,990
)
22,330,689
-
Westgate Pasadena Condos
Pasadena, CA
(F)
-
29,977,725
16,130,079
-
-
29,977,725
16,130,079
46,107,804
-
46,107,804
-
Westgate Pasadena and Green
Pasadena, CA
(F)
-
-
390,813
-
-
-
390,813
390,813
-
390,813
-
Westside Villas I
Los Angeles, CA
1,785,000
3,233,254
-
256,198
1,785,000
3,489,452
5,274,452
(1,324,557
)
3,949,895
-
Westside Villas II
Los Angeles, CA
1,955,000
3,541,435
-
139,793
1,955,000
3,681,228
5,636,228
(1,307,577
)
4,328,651
-
Westside Villas III
Los Angeles, CA
3,060,000
5,538,871
-
203,576
3,060,000
5,742,447
8,802,447
(2,045,237
)
6,757,210
-
Westside Villas IV
Los Angeles, CA
3,060,000
5,539,390
-
212,024
3,060,000
5,751,414
8,811,414
(2,039,061
)
6,772,353
-
Westside Villas V
Los Angeles, CA
5,100,000
9,224,485
-
368,292
5,100,000
9,592,777
14,692,777
(3,414,998
)
11,277,779
-
S-9
EQUITY RESIDENTIAL
Schedule III - Real Estate and Accumulated Depreciation
December 31, 2010
Cost Capitalized
Subsequent to
Gross Amount Carried
Initial Cost to
Acquisition
at Close of
Description
Company
(Improvements, net) (E)
Period 12/31/10
Date of
Building &
Building &
Building &
Accumulated
Investment in Real
Apartment Name
Location
Construction
Units (H)
Land
Fixtures
Land
Fixtures
Land
Fixtures (A)
Total (B)
Depreciation (C)
Estate, Net at 12/31/10 (B)
Encumbrances
Westside Villas VI
Los Angeles, CA
1,530,000
3,023,523
-
231,964
1,530,000
3,255,487
4,785,487
(1,182,625
)
3,602,862
-
Westside Villas VII
Los Angeles, CA
4,505,000
10,758,900
-
361,135
4,505,000
11,120,035
15,625,035
(3,377,984
)
12,247,051
-
Wimberly at Deerwood
Jacksonville, FL
8,000,000
30,057,214
-
1,524,972
8,000,000
31,582,186
39,582,186
(7,060,939
)
32,521,247
-
Winchester Park
Riverside, RI
2,822,618
18,868,626
-
6,221,418
2,822,618
25,090,044
27,912,662
(10,446,769
)
17,465,893
-
Winchester Wood
Riverside, RI
683,215
4,567,154
-
798,960
683,215
5,366,114
6,049,329
(2,013,478
)
4,035,851
-
Windsor at Fair Lakes
Fairfax, VA
10,000,000
28,587,109
-
5,870,235
10,000,000
34,457,344
44,457,344
(9,463,894
)
34,993,450
-
Winston, The (FL)
Pembroke Pines, FL
2001/2003
18,561,000
49,527,569
-
1,617,923
18,561,000
51,145,492
69,706,492
(8,441,759
)
61,264,733
-
Wood Creek (CA)
Pleasant Hill, CA
9,729,900
23,009,768
-
4,472,213
9,729,900
27,481,981
37,211,881
(12,645,672
)
24,566,209
-
Woodbridge (CT)
Newington, CT
498,377
3,331,548
-
862,784
498,377
4,194,332
4,692,709
(1,635,504
)
3,057,205
-
Woodleaf
Campbell, CA
8,550,600
16,988,183
-
1,418,889
8,550,600
18,407,072
26,957,672
(8,148,131
)
18,809,541
-
Woodside
Lorton, VA
1,326,000
12,510,903
-
5,846,332
1,326,000
18,357,235
19,683,235
(10,821,201
)
8,862,034
-
Management Business
Chicago, IL
(D)
-
-
-
-
79,865,530
-
79,865,530
79,865,530
(61,109,987
)
18,755,543
-
Operating Partnership
Chicago, IL
(F)
-
-
804,852
-
-
-
804,852
804,852
-
804,852
-
EQR Wholly Owned Unencumbered
80,239
2,929,343,369
8,675,464,206
-
950,595,062
2,929,343,369
9,626,059,268
12,555,402,637
(2,847,912,228
)
9,707,490,409
-
EQR Wholly Owned Encumbered:
929 House
Cambridge, MA (G)
3,252,993
21,745,595
-
4,361,591
3,252,993
26,107,186
29,360,179
(9,147,568
)
20,212,611
3,059,026
Academy Village
North Hollywood, CA
25,000,000
23,593,194
-
5,642,404
25,000,000
29,235,598
54,235,598
(8,614,636
)
45,620,962
20,000,000
Acappella
Pasadena, CA
5,839,548
29,360,452
-
-
5,839,548
29,360,452
35,200,000
-
35,200,000
20,886,508
Acton Courtyard
Berkeley, CA (G)
5,550,000
15,785,509
-
58,895
5,550,000
15,844,404
21,394,404
(2,806,816
)
18,587,588
9,920,000
Alborada
Fremont, CA
24,310,000
59,214,129
-
2,251,542
24,310,000
61,465,671
85,775,671
(23,124,504
)
62,651,167
(J)
Alexander on Ponce
Atlanta, GA
9,900,000
35,819,022
-
1,541,765
9,900,000
37,360,787
47,260,787
(8,232,441
)
39,028,346
28,880,000
Amberton
Manassas, VA
900,600
11,921,815
-
2,406,495
900,600
14,328,310
15,228,910
(7,347,971
)
7,880,939
10,705,000
Arbor Terrace
Sunnyvale, CA
9,057,300
18,483,642
-
2,226,056
9,057,300
20,709,698
29,766,998
(9,184,819
)
20,582,179
(L)
Arboretum (MA)
Canton, MA
4,685,900
10,992,751
-
1,798,509
4,685,900
12,791,260
17,477,160
(6,000,939
)
11,476,221
(I)
Artech Building
Berkeley, CA (G)
1,642,000
9,152,518
-
85,975
1,642,000
9,238,493
10,880,493
(1,437,190
)
9,443,303
3,200,000
Artisan Square
Northridge, CA
7,000,000
20,537,359
-
687,091
7,000,000
21,224,450
28,224,450
(6,239,094
)
21,985,356
22,779,715
Avanti
Anaheim, CA
12,960,000
18,497,683
-
1,018,387
12,960,000
19,516,070
32,476,070
(4,132,155
)
28,343,915
19,850,000
Bachenheimer Building
Berkeley, CA (G)
3,439,000
13,866,379
-
42,240
3,439,000
13,908,619
17,347,619
(2,287,866
)
15,059,753
8,585,000
Bella Vista Apartments at Boca Del Mar
Boca Raton, FL
11,760,000
20,190,252
-
13,328,327
11,760,000
33,518,579
45,278,579
(13,414,974
)
31,863,605
26,134,010
Bellagio Apartment Homes
Scottsdale, AZ
2,626,000
16,025,041
-
953,738
2,626,000
16,978,779
19,604,779
(4,541,961
)
15,062,818
(L)
Berkeleyan
Berkeley, CA (G)
4,377,000
16,022,110
-
264,145
4,377,000
16,286,255
20,663,255
(2,735,637
)
17,927,618
8,290,000
Bradley Park
Puyallup, WA
3,813,000
18,313,645
-
388,646
3,813,000
18,702,291
22,515,291
(4,995,318
)
17,519,973
11,143,586
Briarwood (CA)
Sunnyvale, CA
9,991,500
22,247,278
-
1,434,998
9,991,500
23,682,276
33,673,776
(10,266,159
)
23,407,617
12,800,000
Brookside (CO)
Boulder, CO
3,600,400
10,211,159
-
1,520,927
3,600,400
11,732,086
15,332,486
(5,075,082
)
10,257,404
(L)
Canterbury
Germantown, MD (I)
2,781,300
32,942,531
-
13,914,331
2,781,300
46,856,862
49,638,162
(24,687,359
)
24,950,803
31,680,000
Cape House I
Jacksonville, FL
4,800,000
22,484,240
-
426,982
4,800,000
22,911,222
27,711,222
(4,507,742
)
23,203,480
13,748,202
Cape House II
Jacksonville, FL
4,800,000
22,229,836
-
1,689,141
4,800,000
23,918,977
28,718,977
(4,773,188
)
23,945,789
13,302,929
Carmel Terrace
San Diego, CA
1988-1989
2,288,300
20,596,281
-
9,979,210
2,288,300
30,575,491
32,863,791
(16,480,043
)
16,383,748
(K)
Cascade at Landmark
Alexandria, VA
3,603,400
19,657,554
-
6,814,326
3,603,400
26,471,880
30,075,280
(12,856,433
)
17,218,847
31,921,089
Centennial Court
Seattle, WA (G)
3,800,000
21,280,039
-
362,829
3,800,000
21,642,868
25,442,868
(5,029,405
)
20,413,463
15,557,428
Centennial Tower
Seattle, WA (G)
5,900,000
48,800,339
-
2,046,434
5,900,000
50,846,773
56,746,773
(11,438,821
)
45,307,952
25,300,790
Chelsea Square
Redmond, WA
3,397,100
9,289,074
-
1,388,566
3,397,100
10,677,640
14,074,740
(4,562,296
)
9,512,444
(L)
Church Corner
Cambridge, MA (G)
5,220,000
16,744,643
-
1,179,544
5,220,000
17,924,187
23,144,187
(4,248,578
)
18,895,609
12,000,000
Cierra Crest
Denver, CO
4,803,100
34,894,898
-
4,402,011
4,803,100
39,296,909
44,100,009
(18,210,852
)
25,889,157
(L)
City Pointe
Fullerton, CA (G)
6,863,792
36,476,207
-
83,706
6,863,792
36,559,913
43,423,705
(2,707,002
)
40,716,703
23,503,206
Colorado Pointe
Denver, CO
5,790,000
28,815,766
-
408,628
5,790,000
29,224,394
35,014,394
(6,452,888
)
28,561,506
(K)
Conway Court
Roslindale, MA
101,451
710,524
-
229,420
101,451
939,944
1,041,395
(395,244
)
646,151
260,117
Copper Canyon
Highlands Ranch, CO
1,442,212
16,251,114
-
1,150,650
1,442,212
17,401,764
18,843,976
(7,322,122
)
11,521,854
(K)
S-10
EQUITY RESIDENTIAL
Schedule III - Real Estate and Accumulated Depreciation
December 31, 2010
Cost Capitalized
Subsequent to
Gross Amount Carried
Initial Cost to
Acquisition
at Close of
Description
Company
(Improvements, net) (E)
Period 12/31/10
Date of
Building &
Building &
Building &
Accumulated
Investment in Real
Apartment Name
Location
Construction
Units (H)
Land
Fixtures
Land
Fixtures
Land
Fixtures (A)
Total (B)
Depreciation (C)
Estate, Net at 12/31/10 (B)
Encumbrances
Country Brook
Chandler, AZ
1986-1996
1,505,219
29,542,535
-
3,653,889
1,505,219
33,196,424
34,701,643
(15,485,956
)
19,215,687
(K)
Country Club Lakes
Jacksonville, FL
15,000,000
41,055,786
-
4,105,750
15,000,000
45,161,536
60,161,536
(11,315,474
)
48,846,062
32,097,598
Creekside (San Mateo)
San Mateo, CA
9,606,600
21,193,232
-
2,040,890
9,606,600
23,234,122
32,840,722
(9,971,049
)
22,869,673
(L)
Crescent at Cherry Creek
Denver, CO
2,594,000
15,149,470
-
2,620,271
2,594,000
17,769,741
20,363,741
(8,074,935
)
12,288,806
(K)
Deerwood (SD)
San Diego, CA
2,082,095
18,739,815
-
13,007,845
2,082,095
31,747,660
33,829,755
(17,756,307
)
16,073,448
(K)
Estates at Maitland Summit
Orlando, FL
9,520,000
28,352,160
-
678,371
9,520,000
29,030,531
38,550,531
(7,308,841
)
31,241,690
(L)
Estates at Tanglewood
Westminster, CO
7,560,000
51,256,538
-
1,850,357
7,560,000
53,106,895
60,666,895
(12,304,895
)
48,362,000
(J)
Fairfield
Stamford, CT (G)
6,510,200
39,690,120
-
5,118,992
6,510,200
44,809,112
51,319,312
(19,894,444
)
31,424,868
34,595,000
Fine Arts Building
Berkeley, CA (G)
7,817,000
26,462,772
-
58,091
7,817,000
26,520,863
34,337,863
(4,506,280
)
29,831,583
16,215,000
Gaia Building
Berkeley, CA (G)
7,113,000
25,623,826
-
117,077
7,113,000
25,740,903
32,853,903
(4,345,971
)
28,507,932
14,630,000
Gateway at Malden Center
Malden, MA (G)
9,209,780
25,722,666
-
7,947,656
9,209,780
33,670,322
42,880,102
(10,662,848
)
32,217,254
14,970,000
Geary Court Yard
San Francisco, CA
1,722,400
15,471,429
-
2,040,242
1,722,400
17,511,671
19,234,071
(8,300,938
)
10,933,133
18,893,440
Glen Meadow
Franklin, MA
2,339,330
16,133,588
-
3,534,410
2,339,330
19,667,998
22,007,328
(8,107,522
)
13,899,806
619,538
Grandeville at River Place
Oviedo, FL
6,000,000
23,114,693
-
1,520,490
6,000,000
24,635,183
30,635,183
(6,872,649
)
23,762,534
28,890,000
Greenhaven
Union City, CA
7,507,000
15,210,399
-
2,970,066
7,507,000
18,180,465
25,687,465
(8,456,557
)
17,230,908
10,975,000
Greenhouse - Frey Road
Kennesaw, GA
2,467,200
22,187,443
-
4,922,373
2,467,200
27,109,816
29,577,016
(16,164,084
)
13,412,932
19,700,000
Greenwood Park
Centennial, CO
4,365,000
38,372,440
-
1,136,402
4,365,000
39,508,842
43,873,842
(6,846,735
)
37,027,107
(L)
Greenwood Plaza
Centennial, CO
3,990,000
35,846,708
-
1,658,135
3,990,000
37,504,843
41,494,843
(6,529,493
)
34,965,350
(L)
Harbor Steps
Seattle, WA (G)
59,900,000
158,829,432
-
5,787,753
59,900,000
164,617,185
224,517,185
(34,944,472
)
189,572,713
125,926,373
Hathaway
Long Beach, CA
2,512,500
22,611,912
-
6,365,675
2,512,500
28,977,587
31,490,087
(15,770,720
)
15,719,367
46,517,800
Heights on Capitol Hill
Seattle, WA (G)
5,425,000
21,138,028
-
55,704
5,425,000
21,193,732
26,618,732
(3,965,879
)
22,652,853
19,320,000
Heritage at Stone Ridge
Burlington, MA
10,800,000
31,808,335
-
607,280
10,800,000
32,415,615
43,215,615
(7,307,875
)
35,907,740
28,150,164
Heronfield
Kirkland, WA
9,245,000
27,018,110
-
1,212,853
9,245,000
28,230,963
37,475,963
(5,306,819
)
32,169,144
(K)
Highlands at Cherry Hill
Cherry Hills, NJ
6,800,000
21,459,108
-
582,660
6,800,000
22,041,768
28,841,768
(4,883,071
)
23,958,697
14,947,792
Ivory Wood
Bothell, WA
2,732,800
13,888,282
-
543,271
2,732,800
14,431,553
17,164,353
(3,798,957
)
13,365,396
8,020,000
Jaclen Towers
Beverly, MA
437,072
2,921,735
-
1,125,390
437,072
4,047,125
4,484,197
(1,826,858
)
2,657,339
1,208,416
Kelvin Court (fka Alta Pacific)
Irvine, CA
10,752,145
34,628,114
-
11,381
10,752,145
34,639,495
45,391,640
(3,455,525
)
41,936,115
28,260,000
La Terrazza at Colma Station
Colma, CA (G)
-
41,251,043
-
458,671
-
41,709,714
41,709,714
(6,759,707
)
34,950,007
25,940,000
LaSalle
Beaverton, OR (G)
7,202,000
35,877,612
-
2,584,539
7,202,000
38,462,151
45,664,151
(12,221,817
)
33,442,334
28,342,496
Liberty Park
Brain Tree, MA
5,977,504
26,749,111
-
1,935,923
5,977,504
28,685,034
34,662,538
(8,587,844
)
26,074,694
24,980,280
Liberty Tower
Arlington, VA (G)
16,382,822
83,817,078
-
98,458
16,382,822
83,915,536
100,298,358
(2,774,628
)
97,523,730
49,160,870
Lincoln Heights
Quincy, MA
5,928,400
33,595,262
-
10,549,292
5,928,400
44,144,554
50,072,954
(19,375,802
)
30,697,152
(L)
Longview Place
Waltham, MA
20,880,000
90,255,509
-
1,460,656
20,880,000
91,716,165
112,596,165
(18,368,568
)
94,227,597
57,029,000
Market Street Village
San Diego, CA
13,740,000
40,757,300
-
345,628
13,740,000
41,102,928
54,842,928
(7,630,442
)
47,212,486
(K)
Marks
Englewood, CO (G)
4,928,500
44,622,314
-
8,060,048
4,928,500
52,682,362
57,610,862
(24,944,534
)
32,666,328
19,195,000
Metro on First
Seattle, WA (G)
8,540,000
12,209,981
-
254,915
8,540,000
12,464,896
21,004,896
(2,757,191
)
18,247,705
16,650,000
Mill Creek
Milpitas, CA
12,858,693
57,168,503
-
2,403,984
12,858,693
59,572,487
72,431,180
(17,116,835
)
55,314,345
69,312,259
Miramar Lakes
Miramar, FL
17,200,000
51,487,235
-
1,343,639
17,200,000
52,830,874
70,030,874
(11,391,642
)
58,639,232
(M)
Missions at Sunbow
Chula Vista, CA
28,560,000
59,287,595
-
1,148,849
28,560,000
60,436,444
88,996,444
(14,871,085
)
74,125,359
55,091,000
Monte Viejo
Phoneix, AZ
12,700,000
45,926,784
-
976,950
12,700,000
46,903,734
59,603,734
(11,299,701
)
48,304,033
40,960,036
Montecito
Valencia, CA
8,400,000
24,709,146
-
1,732,020
8,400,000
26,441,166
34,841,166
(9,562,693
)
25,278,473
(K)
Montierra
Scottsdale, AZ
3,455,000
17,266,787
-
1,458,706
3,455,000
18,725,493
22,180,493
(7,870,337
)
14,310,156
17,858,854
Montierra (CA)
San Diego, CA
8,160,000
29,360,938
-
6,457,847
8,160,000
35,818,785
43,978,785
(13,974,022
)
30,004,763
(K)
Mosaic at Metro
Hyattsville, MD
-
59,653,038
-
49,368
-
59,702,406
59,702,406
(4,118,730
)
55,583,676
45,046,469
Mountain Park Ranch
Phoenix, AZ
1,662,332
18,260,276
-
1,748,558
1,662,332
20,008,834
21,671,166
(9,432,301
)
12,238,865
(J)
Mountain Terrace
Stevenson Ranch, CA
3,966,500
35,814,995
-
11,502,806
3,966,500
47,317,801
51,284,301
(21,425,003
)
29,859,298
57,428,472
Northpark
Burlingame, CA
38,607,000
77,493,000
-
39,582
38,607,000
77,532,582
116,139,582
(3,084,091
)
113,055,491
70,668,409
North Pier at Harborside
Jersey City, NJ (J)
4,000,159
94,348,092
-
1,739,535
4,000,159
96,087,627
100,087,786
(22,321,947
)
77,765,839
76,862,000
S-11
EQUITY RESIDENTIAL
Schedule III - Real Estate and Accumulated Depreciation
December 31, 2010
Cost Capitalized
Subsequent to
Gross Amount Carried
Initial Cost to
Acquisition
at Close of
Description
Company
(Improvements, net) (E)
Period 12/31/10
Date of
Building &
Building &
Building &
Accumulated
Investment in Real
Apartment Name
Location
Construction
Units (H)
Land
Fixtures
Land
Fixtures
Land
Fixtures (A)
Total (B)
Depreciation (C)
Estate, Net at 12/31/10 (B)
Encumbrances
Oak Mill I
Germantown, MD
10,000,000
13,155,522
-
7,235,088
10,000,000
20,390,610
30,390,610
(6,289,524
)
24,101,086
12,487,301
Oak Mill II
Germantown, MD
854,133
10,233,947
-
5,864,959
854,133
16,098,906
16,953,039
(8,498,045
)
8,454,994
9,600,000
Oaks
Santa Clarita, CA
23,400,000
61,020,438
-
2,652,544
23,400,000
63,672,982
87,072,982
(17,959,221
)
69,113,761
41,154,036
Olde Redmond Place
Redmond, WA
4,807,100
14,126,038
-
4,122,122
4,807,100
18,248,160
23,055,260
(8,527,802
)
14,527,458
(L)
Parc East Towers
New York, NY (G)
102,163,000
109,013,628
-
5,654,774
102,163,000
114,668,402
216,831,402
(18,284,019
)
198,547,383
17,473,846
Park Meadow
Gilbert, AZ
835,217
15,120,769
-
2,267,564
835,217
17,388,333
18,223,550
(8,395,148
)
9,828,402
(L)
Parkfield
Denver, CO
8,330,000
28,667,618
-
2,155,451
8,330,000
30,823,069
39,153,069
(11,251,895
)
27,901,174
23,275,000
Promenade at Peachtree
Chamblee, GA
10,150,000
31,219,739
-
1,645,577
10,150,000
32,865,316
43,015,316
(8,729,820
)
34,285,496
(K)
Promenade at Town Center II
Valencia, CA
13,500,000
34,405,636
-
391,668
13,500,000
34,797,304
48,297,304
(9,307,693
)
38,989,611
32,785,701
Providence
Bothell, WA
3,573,621
19,055,505
-
541,320
3,573,621
19,596,825
23,170,446
(5,354,911
)
17,815,535
(J)
Reserve at Clarendon Centre, The
Arlington, VA (G)
10,500,000
52,812,935
-
1,777,312
10,500,000
54,590,247
65,090,247
(14,249,748
)
50,840,499
(K)
Reserve at Eisenhower, The
Alexandria, VA
6,500,000
34,585,060
-
702,144
6,500,000
35,287,204
41,787,204
(10,058,015
)
31,729,189
(K)
Reserve at Empire Lakes
Rancho Cucamonga, CA
16,345,000
73,080,670
-
1,396,394
16,345,000
74,477,064
90,822,064
(15,486,334
)
75,335,730
(J)
Reserve at Fairfax Corners
Fairfax, VA
15,804,057
63,129,051
-
2,563,175
15,804,057
65,692,226
81,496,283
(19,948,034
)
61,548,249
84,778,876
Reserve at Potomac Yard
Alexandria, VA
11,918,917
68,976,484
-
3,376,272
11,918,917
72,352,756
84,271,673
(17,772,440
)
66,499,233
66,470,000
Reserve at Town Center (WA)
Mill Creek, WA
10,369,400
41,172,081
-
1,414,773
10,369,400
42,586,854
52,956,254
(10,871,457
)
42,084,797
29,160,000
Rianna II
Seattle, WA (G)
2,161,840
14,433,614
-
16,614
2,161,840
14,450,228
16,612,068
(1,072,947
)
15,539,121
10,499,494
Rockingham Glen
West Roxbury, MA
1,124,217
7,515,160
-
1,533,725
1,124,217
9,048,885
10,173,102
(3,757,339
)
6,415,763
1,440,865
Rolling Green (Amherst)
Amherst, MA
1,340,702
8,962,317
-
3,313,332
1,340,702
12,275,649
13,616,351
(5,297,121
)
8,319,230
2,217,176
Rolling Green (Milford)
Milford, MA
2,012,350
13,452,150
-
3,986,562
2,012,350
17,438,712
19,451,062
(7,305,093
)
12,145,969
4,645,763
San Marcos Apartments
Scottsdale, AZ
20,000,000
31,261,609
-
1,384,451
20,000,000
32,646,060
52,646,060
(7,272,584
)
45,373,476
32,900,000
Savannah Lakes
Boynton Beach, FL
7,000,000
30,263,310
-
4,429,051
7,000,000
34,692,361
41,692,361
(11,606,796
)
30,085,565
36,610,000
Savannah Midtown
Atlanta, GA
7,209,873
29,433,507
-
2,603,453
7,209,873
32,036,960
39,246,833
(8,514,514
)
30,732,319
17,800,000
Savoy I
Aurora, CO
5,450,295
38,765,670
-
1,964,604
5,450,295
40,730,274
46,180,569
(11,009,808
)
35,170,761
(L)
Sheffield Court
Arlington, VA
3,342,381
31,337,332
-
7,927,865
3,342,381
39,265,197
42,607,578
(21,583,314
)
21,024,264
(L)
Sonata at Cherry Creek
Denver, CO
5,490,000
18,130,479
-
1,162,983
5,490,000
19,293,462
24,783,462
(6,957,885
)
17,825,577
19,190,000
Sonterra at Foothill Ranch
Foothill Ranch, CA
7,503,400
24,048,507
-
1,500,506
7,503,400
25,549,013
33,052,413
(11,490,634
)
21,561,779
(L)
South Winds
Fall River, MA
2,481,821
16,780,359
-
3,712,343
2,481,821
20,492,702
22,974,523
(8,697,220
)
14,277,303
4,437,567
Springs Colony
Altamonte Springs, FL
630,411
5,852,157
-
2,363,300
630,411
8,215,457
8,845,868
(5,129,095
)
3,716,773
(I)
Stonegate (CO)
Broomfield, CO
8,750,000
32,998,775
-
2,700,719
8,750,000
35,699,494
44,449,494
(8,900,049
)
35,549,445
(J)
Stoneleigh at Deerfield
Alpharetta, GA
4,810,000
29,999,596
-
871,524
4,810,000
30,871,120
35,681,120
(7,656,545
)
28,024,575
16,800,000
Stoney Ridge
Dale City, VA
8,000,000
24,147,091
-
5,287,141
8,000,000
29,434,232
37,434,232
(7,934,618
)
29,499,614
15,138,399
Stonybrook
Boynton Beach, FL
10,500,000
24,967,638
-
951,679
10,500,000
25,919,317
36,419,317
(6,210,078
)
30,209,239
20,971,587
Summerhill Glen
Maynard, MA
415,812
3,000,816
-
766,088
415,812
3,766,904
4,182,716
(1,622,076
)
2,560,640
1,174,207
Summerset Village
Chatsworth, CA
2,890,450
23,670,889
-
3,797,264
2,890,450
27,468,153
30,358,603
(13,674,820
)
16,683,783
38,039,912
Sunforest
Davie, FL
10,000,000
32,124,850
-
4,030,481
10,000,000
36,155,331
46,155,331
(11,194,003
)
34,961,328
(L)
Sunforest II
Davie, FL
(F)
-
-
337,751
-
-
-
337,751
337,751
-
337,751
(L)
Talleyrand
Tarrytown, NY (I)
1997-1998
12,000,000
49,838,160
-
3,696,522
12,000,000
53,534,682
65,534,682
(17,861,336
)
47,673,346
35,000,000
Tanglewood (VA)
Manassas, VA
2,108,295
24,619,495
-
8,462,243
2,108,295
33,081,738
35,190,033
(18,128,350
)
17,061,683
25,110,000
Teresina
Chula Vista, CA
28,600,000
61,916,670
-
1,767,940
28,600,000
63,684,610
92,284,610
(13,155,998
)
79,128,612
44,095,588
Touriel Building
Berkeley, CA (G)
2,736,000
7,810,027
-
33,587
2,736,000
7,843,614
10,579,614
(1,392,156
)
9,187,458
5,050,000
Town Square at Mark Center I (fka Millbrook I)
Alexandria, VA
24,360,000
86,178,714
-
2,422,299
24,360,000
88,601,013
112,961,013
(19,521,198
)
93,439,815
64,680,000
Town Square at Mark Center Phase II
Alexandria, VA
15,568,464
55,031,536
-
34,830
15,568,464
55,066,366
70,634,830
(1,956,133
)
68,678,697
47,669,865
Tradition at Alafaya
Oviedo, FL
7,590,000
31,881,505
-
238,496
7,590,000
32,120,001
39,710,001
(7,731,307
)
31,978,694
(K)
Tuscany at Lindbergh
Atlanta, GA
9,720,000
40,874,023
-
1,753,394
9,720,000
42,627,417
52,347,417
(11,365,288
)
40,982,129
32,360,000
Uptown Square
Denver, CO (G)
1999/2001
17,492,000
100,696,541
-
2,232,071
17,492,000
102,928,612
120,420,612
(24,014,273
)
96,406,339
88,550,000
Versailles
Woodland Hills, CA
12,650,000
33,656,292
-
3,630,019
12,650,000
37,286,311
49,936,311
(11,205,924
)
38,730,387
30,372,953
Via Ventura
Scottsdale, AZ
1,351,785
13,382,006
-
7,962,802
1,351,785
21,344,808
22,696,593
(14,368,306
)
8,328,287
(K)
S-12
EQUITY RESIDENTIAL
Schedule III - Real Estate and Accumulated Depreciation
December 31, 2010
Cost Capitalized
Subsequent to
Gross Amount Carried
Initial Cost to
Acquisition
at Close of
Description
Company
(Improvements, net) (E)
Period 12/31/10
Date of
Building &
Building &
Building &
Accumulated
Investment in Real
Apartment Name
Location
Construction
Units (H)
Land
Fixtures
Land
Fixtures
Land
Fixtures (A)
Total (B)
Depreciation (C)
Estate, Net at 12/31/10 (B)
Encumbrances
Village at Lakewood
Phoenix, AZ
3,166,411
13,859,090
-
2,013,344
3,166,411
15,872,434
19,038,845
(7,739,644
)
11,299,201
(L)
Vintage
Ontario, CA
2005-2007
7,059,230
47,677,762
-
176,250
7,059,230
47,854,012
54,913,242
(8,609,805
)
46,303,437
33,000,000
Warwick Station
Westminster, CO
2,274,121
21,113,974
-
3,015,763
2,274,121
24,129,737
26,403,858
(11,495,261
)
14,908,597
8,355,000
Wellington Hill
Manchester, NH
1,890,200
17,120,662
-
7,628,748
1,890,200
24,749,410
26,639,610
(15,003,057
)
11,636,553
(I)
Westgate Pasadena Apartments
Pasadena, CA
22,898,848
131,986,739
-
(263
)
22,898,848
131,986,476
154,885,324
(185
)
154,885,139
135,000,000
Westwood Glen
Westwood, MA
1,616,505
10,806,004
-
1,495,929
1,616,505
12,301,933
13,918,438
(4,379,593
)
9,538,845
392,294
Whisper Creek
Denver, CO
5,310,000
22,998,558
-
843,388
5,310,000
23,841,946
29,151,946
(6,016,094
)
23,135,852
13,580,000
Wilkins Glen
Medfield, MA
538,483
3,629,943
-
1,484,323
538,483
5,114,266
5,652,749
(2,071,249
)
3,581,500
1,011,750
Windridge (CA)
Laguna Niguel, CA
2,662,900
23,985,497
-
5,111,877
2,662,900
29,097,374
31,760,274
(16,423,796
)
15,336,478
(I)
Woodlake (WA)
Kirkland, WA
6,631,400
16,735,484
-
2,745,189
6,631,400
19,480,673
26,112,073
(9,005,733
)
17,106,340
(L)
EQR Wholly Owned Encumbered
39,395
1,192,346,786
4,453,550,234
-
370,524,330
1,192,346,786
4,824,074,564
6,016,421,350
(1,346,626,508
)
4,669,794,842
2,595,245,052
EQR Partially Owned Unencumbered:
Butterfield Ranch
Chino Hills, CA
(F)
-
15,617,709
4,512,495
-
-
15,617,709
4,512,495
20,130,204
-
20,130,204
-
Hudson Crossing II
New York, NY
(F)
-
5,000,000
-
-
-
5,000,000
-
5,000,000
-
5,000,000
-
EQR Partially Owned Unencumbered
-
20,617,709
4,512,495
-
-
20,617,709
4,512,495
25,130,204
-
25,130,204
-
EQR Partially Owned Encumbered:
Brooklyner (fka 111 Lawrence)
Brooklyn, NY (G)
40,099,922
217,648,526
-
(1,947
)
40,099,922
217,646,579
257,746,501
-
257,746,501
141,741,076
1401 South State (fka City Lofts)
Chicago, IL
6,882,467
61,575,245
-
53,017
6,882,467
61,628,262
68,510,729
(5,846,831
)
62,663,898
51,014,150
2300 Elliott
Seattle, WA
796,800
7,173,725
-
5,462,325
796,800
12,636,050
13,432,850
(7,894,112
)
5,538,738
6,833,000
Bellevue Meadows
Bellevue, WA
4,507,100
12,574,814
-
4,122,712
4,507,100
16,697,526
21,204,626
(7,309,912
)
13,894,714
16,538,000
Canyon Creek (CA)
San Ramon, CA
5,425,000
18,812,121
-
4,809,646
5,425,000
23,621,767
29,046,767
(8,225,808
)
20,820,959
28,000,000
Canyon Ridge
San Diego, CA
4,869,448
11,955,064
-
1,757,641
4,869,448
13,712,705
18,582,153
(6,531,026
)
12,051,127
15,165,000
Copper Creek
Tempe, AZ
1,017,400
9,158,260
-
1,846,036
1,017,400
11,004,296
12,021,696
(5,587,555
)
6,434,141
5,112,000
Country Oaks
Agoura Hills, CA
6,105,000
29,561,865
-
3,142,792
6,105,000
32,704,657
38,809,657
(10,694,009
)
28,115,648
29,412,000
EDS Dulles
Herndon, VA
(F)
-
18,875,631
-
-
-
18,875,631
-
18,875,631
-
18,875,631
18,342,242
Fox Ridge
Englewood, CO
2,490,000
17,522,114
-
3,394,463
2,490,000
20,916,577
23,406,577
(8,158,317
)
15,248,260
20,300,000
Lantern Cove
Foster City, CA
6,945,000
23,332,206
-
2,722,185
6,945,000
26,054,391
32,999,391
(8,961,365
)
24,038,026
36,403,000
Mesa Del Oso
Albuquerque, NM
4,305,000
12,160,419
-
1,556,306
4,305,000
13,716,725
18,021,725
(5,210,415
)
12,811,310
9,525,810
Montclair Metro
Montclair, NJ
2,400,887
43,570,641
-
2,092
2,400,887
43,572,733
45,973,620
(2,218,030
)
43,755,590
34,439,480
Monterra in Mill Creek
Mill Creek, WA
2,800,000
13,255,123
-
236,867
2,800,000
13,491,990
16,291,990
(3,232,493
)
13,059,497
7,286,000
Preserve at Briarcliff
Atlanta, GA
6,370,000
17,766,322
-
646,793
6,370,000
18,413,115
24,783,115
(3,777,603
)
21,005,512
6,000,000
Red Road Commons
Miami, FL (G)
27,383,547
99,555,530
-
(2,216
)
27,383,547
99,553,314
126,936,861
(3,497,205
)
123,439,656
74,150,144
Rosecliff
Quincy, MA
5,460,000
15,721,570
-
1,453,717
5,460,000
17,175,287
22,635,287
(6,797,434
)
15,837,853
17,400,000
Schooner Bay I
Foster City, CA
5,345,000
20,509,239
-
3,191,061
5,345,000
23,700,300
29,045,300
(7,741,356
)
21,303,944
27,000,000
Schooner Bay II
Foster City, CA
4,550,000
18,142,163
-
2,985,085
4,550,000
21,127,248
25,677,248
(6,970,045
)
18,707,203
23,760,000
Scottsdale Meadows
Scottsdale, AZ
1,512,000
11,423,349
-
1,629,554
1,512,000
13,052,903
14,564,903
(6,274,752
)
8,290,151
9,100,000
Strayhorse at Arrowhead Ranch
Glendale, AZ
4,400,000
12,968,002
-
186,009
4,400,000
13,154,011
17,554,011
(2,422,470
)
15,131,541
7,971,429
Surrey Downs
Bellevue, WA
3,057,100
7,848,618
-
1,993,876
3,057,100
9,842,494
12,899,594
(4,301,654
)
8,597,940
9,829,000
Veridian (fka Silver Spring)
Silver Spring, MD (G)
18,539,817
130,485,284
-
18,886
18,539,817
130,504,170
149,043,987
(6,908,776
)
142,135,211
115,744,722
Virgil Square
Los Angeles, CA
5,500,000
15,216,613
-
1,334,954
5,500,000
16,551,567
22,051,567
(3,992,519
)
18,059,048
9,900,000
Willow Brook (CA)
Pleasant Hill, CA
5,055,000
38,388,672
-
1,857,343
5,055,000
40,246,015
45,301,015
(10,264,218
)
35,036,797
29,000,000
EQR Partially Owned Encumbered
5,232
194,692,119
866,325,485
-
44,399,197
194,692,119
910,724,682
1,105,416,801
(142,817,905
)
962,598,896
749,967,053
Portfolio/Entity Encumbrances (1)
1,417,683,780
Total Consolidated Investment in Real Estate
124,866
$
4,336,999,983
$
13,999,852,420
$
-
$
1,365,518,589
$
4,336,999,983
$
15,365,371,009
$
319,702,370,992
$
(4,337,356,641
)
$
15,365,014,351
$
4,762,895,885
(1)
See attached Encumbrances Reconciliation
S-13
EQUITY RESIDENTIAL
Schedule III - Real Estate and Accumulated Depreciation
December 31, 2010
NOTES:
(A)
The balance of furniture & fixtures included in the total investment in real estate amount was $1,231,391,664 as of December 31, 2010.
(B)
The cost, net of accumulated depreciation, for Federal Income Tax purposes as of December 31, 2010 was approximately $11.1 billion.
(C)
The life to compute depreciation for building is 30 years, for building improvements ranges from 5 to 10 years, for furniture & fixtures and replacements is 5 years, and for in-place leases is the average remaining term of each respective lease.
(D)
This asset consists of various acquisition dates and largely represents furniture, fixtures and equipment, leasehold improvements and capitalized software costs owned by the Management Business, which are generally depreciated over periods ranging from 3 to 7 years.
(E)
Primarily represents capital expenditures for major maintenance and replacements incurred subsequent to each property’s acquisition date.
(F)
Represents land and/or construction-in-progress on projects either held for future development or projects currently under development.
(G)
A portion or all of these properties includes commercial space (retail, parking and/or office space).
(H)
Total properties and units exclude the Military Housing consisting of two properties and 4,738 units.
(I)
through (L) See Encumbrances Reconciliation schedule.
(M)
Boot property for Freddie Mac tax-exempt bond pool.
S-14
EXHIBIT INDEX
The exhibits listed below are filed as part of this report. References to exhibits or other filings under the caption “Location” indicate that the exhibit or other filing has been filed, that the indexed exhibit and the exhibit referred to are the same and that the exhibit referred to is incorporated by reference. The Commission file number for our Exchange Act filings referenced below is 1-12252.
Exhibit
Description
Location
3.1
Articles of Restatement of Declaration of Trust of Equity Residential dated December 9, 2004.
Included as Exhibit 3.1 to the Company’s Form 10-K for the year ended December 31, 2004.
3.2
Seventh Amended and Restated Bylaws of Equity Residential, effective as of December 14, 2010.
Included as Exhibit 3.1 to the Company’s Form 8-K dated and filed on December 14, 2010.
4.1
Indenture, dated October 1, 1994, between the Operating Partnership and The Bank of New York Mellon Trust Company, N.A., as successor trustee (“Indenture”).
Included as Exhibit 4(a) to the Operating Partnership’s Form S-3 filed on October 7, 1994.
4.2
First Supplemental Indenture to Indenture, dated as of September 9, 2004.
Included as Exhibit 4.2 to the Operating Partnership’s Form 8-K, filed on September 10, 2004.
4.3
Second Supplemental Indenture to Indenture, dated as of August 23, 2006.
Included as Exhibit 4.1 to the Operating Partnership’s Form 8-K dated August 16, 2006, filed on August 23, 2006.
4.4
Third Supplemental Indenture to Indenture, dated as of June 4, 2007.
Included as Exhibit 4.1 to the Operating Partnership’s Form 8-K dated May 30, 2007, filed on June 1, 2007.
4.5
Terms Agreement regarding 6.95% Notes due March 2, 2011.
Included as Exhibit 1 to the Operating Partnership’s Form 8-K, filed on March 2, 2001.
4.6
Terms Agreement regarding 6.625% Notes due March 15, 2012.
Included as Exhibit 1 to the Operating Partnership’s Form 8-K, filed on March 14, 2002.
4.7
Form of 5.50% Note due October 1, 2012.
Included as Exhibit 4.2 to the Operating Partnership’s Form 8-K dated May 30, 2007, filed on June 1, 2007.
4.8
Form of 5.2% Note due April 1, 2013.
Included as Exhibit 4 to the Operating Partnership’s Form 8-K, filed on March 19, 2003.
4.9
Form of 5.25% Note due September 15, 2014.
Included as Exhibit 4.1 to the Operating Partnership’s Form 8-K, filed on September 10, 2004.
4.10
Terms Agreement regarding 6.63% (subsequently remarketed to a 6.584% fixed rate) Notes due April 13, 2015.
Included as Exhibit 1 to the Operating Partnership’s Form 8-K, filed on April 13, 1998.
4.11
Terms Agreement regarding 5.125% Notes due March 15, 2016.
Included as Exhibit 1.1 to the Operating Partnership’s Form 8-K, filed on September 13, 2005.
4.12
Form of 5.375% Note due August 1, 2016.
Included as Exhibit 4.1 to the Operating Partnership’s Form 8-K dated January 11, 2006, filed on January 18, 2006.
4.13
Form of 5.75% Note due June 15, 2017.
Included as Exhibit 4.3 to the Operating Partnership’s Form 8-K dated May 30, 2007, filed on June 1, 2007.
4.14
Terms Agreement regarding 71/8% Notes due October 15, 2017.
Included as Exhibit 1 to the Operating Partnership’s Form 8-K, filed on October 9, 1997.
4.15
Form of 4.75% Note due July 15, 2020.
Included as Exhibit 4.1 to the Operating Partnership’s Form 8-K dated July 12, 2010, filed on July 15, 2010.
4.16
Terms Agreement regarding 7.57% Notes due August 15, 2026.
Included as Exhibit 1 to the Operating Partnership’s Form 8-K, filed on August 13, 1996.
4.17
Form of 3.85% Exchangeable Senior Notes due August 15, 2026.
Included as Exhibit 4.2 to the Operating Partnership’s Form 8-K dated August 16, 2006, filed on August 23, 2006.
10.1
Sixth Amended and Restated Agreement of Limited Partnership for ERP Operating Limited Partnership dated as of March 12, 2009.
Included as Exhibit 10.1 to the Company’s Form 8-K dated March 12, 2009, filed on March 18, 2009.
10.2
*
Noncompetition Agreement (Zell).
Included as an exhibit to the Company’s Form S-11 Registration Statement, File No. 33-63158.
10.3
*
Noncompetition Agreement (Spector).
Included as an exhibit to the Company’s Form S-11 Registration Statement, File No. 33-63158.
Exhibit
Description
Location
10.4
*
Form of Noncompetition Agreement (other officers).
Included as an exhibit to the Company’s Form S-11 Registration Statement, File No. 33-63158.
10.5
Revolving Credit Agreement dated as of February 28, 2007 among ERP Operating Limited Partnership, Bank of America, N.A., as administrative agent, JP Morgan Chase Bank, N.A., as syndication agent, Banc of America Securities LLC and J.P. Morgan Securities Inc., as joint lead arrangers and joint book runners, SunTrust Bank, Wachovia Bank, National Association, Wells Fargo Bank, N.A., LaSalle Bank National Association, The Royal Bank of Scotland plc, and US Bank National Association, as co-documentation agents, and a syndicate of other banks (the “Credit Agreement”).
Attached herein.
10.6
Guaranty of Payment made as of February 28, 2007 between Equity Residential and Bank of America, N.A., as administrative agent for the banks party to the Credit Agreement.
Included as Exhibit 10.2 to the Company’s Form 8-K dated February 28, 2007, filed on March 5, 2007.
10.7
Amendment to Revolving Credit Agreement.
Included as Exhibit 10.1 to the Company’s Form 10-Q for the quarterly period ended March 31, 2007.
10.8
Credit Agreement dated as of October 5, 2007 among ERP Operating Limited Partnership, Bank of America, N.A., as administrative agent, JPMorgan Chase Bank, N.A., as syndication agent, Banc of America Securities LLC, as joint lead arranger and joint book runner, J.P. Morgan Securities Inc., as joint lead arranger and joint book runner, Citicorp North America Inc., Deutsche Bank Securities Inc., Regions Bank, The Royal Bank of Scotland plc, and U.S. Bank National Association, as documentation agents, and a syndicate of other banks (the “Term Loan Agreement”).
Attached herein.
10.9
Guaranty of Payment made as of October 5, 2007 between Equity Residential and Bank of America, N.A., as administrative agent for the lenders party to the Term Loan Agreement.
Included as Exhibit 10.2 to the Company’s Form 8-K dated October 5, 2007, filed on October 11, 2007.
10.10
Amended and Restated Limited Partnership Agreement of Lexford Properties, L.P.
Included as Exhibit 10.16 to the Company’s Form 10-K for the year ended December 31, 1999.
10.11
*
Equity Residential Second Restated 2002 Share Incentive Plan dated December 10, 2008.
Included as Exhibit 10.15 to the Company’s Form 10-K for the year ended December 31, 2008.
10.12
*
First Amendment to Second Restated 2002 Share Incentive Plan.
Included as Exhibit 10.1 to the Company’s Form 10-Q for the quarterly period ended September 30, 2010.
10.13
*
Equity Residential Amended and Restated 1993 Share Option and Share Award Plan.
Included as Exhibit 10.11 to the Company’s Form 10-K for the year ended December 31, 2001.
10.14
*
First Amendment to Equity Residential 1993 Share Option and Share Award Plan.
Included as Exhibit 10.1 to the Company’s Form 10-Q for the quarterly period ended June 30, 2003.
10.15
*
Second Amendment to Equity Residential 1993 Share Option and Share Award Plan.
Included as Exhibit 10.20 to the Company’s Form 10-K for the year ended December 31, 2006.
10.16
*
Third Amendment to Equity Residential 1993 Share Option and Share Award Plan.
Included as Exhibit 10.1 to the Company’s Form 10-Q for the quarterly period ended June 30, 2007.
10.17
*
Fourth Amendment to Equity Residential 1993 Share Option and Share Award Plan.
Included as Exhibit 10.2 to the Company’s Form 10-Q for the quarterly period ended September 30, 2008.
10.18
*
Fifth Amendment to Equity Residential 1993 Share Option and Share Award Plan dated December 10, 2008.
Included as Exhibit 10.21 to the Company’s Form 10-K for the year ended December 31, 2008.
10.19
*
Form of Change in Control Agreement between the Company and other executive officers.
Included as Exhibit 10.13 to the Company’s Form 10-K for the year ended December 31, 2001.
Exhibit
Description
Location
10.20
*
Form of First Amendment to Amended and Restated Change in Control/Severance Agreement with each executive officer.
Included as Exhibit 10.1 to the Company’s Form 10-Q for the quarterly period ended March 31, 2009.
10.21
*
Form of Indemnification Agreement between the Company and each trustee and executive officer.
Included as Exhibit 10.18 to the Company’s Form 10-K for the year ended December 31, 2003.
10.22
*
Form of Letter Agreement between Equity Residential and each of David J. Neithercut, Frederick C. Tuomi, Alan W. George and Bruce C. Strohm.
Included as Exhibit 10.3 to the Company’s Form 10-Q for the quarterly period ended September 30, 2008.
10.23
*
Form of Executive Retirement Benefits Agreement.
Included as Exhibit 10.24 to the Company’s Form 10-K for the year ended December 31, 2006.
10.24
*
Retirement Benefits Agreement between Samuel Zell and the Company dated October 18, 2001.
Included as Exhibit 10.18 to the Company’s Form 10-K for the year ended December 31, 2001.
10.25
*
Amended and Restated Deferred Compensation Agreement between the Company and Gerald A. Spector dated January 1, 2002.
Included as Exhibit 10.17 to the Company’s Form 10-K for the year ended December 31, 2001.
10.26
*
Change in Control Agreement dated as of March 13, 2009 by and between Equity Residential and Mark J. Parrell, Executive Vice President and Chief Financial Officer.
Included as Exhibit 10.2 to the Company’s Form 8-K dated March 12, 2009, filed on March 18, 2009.
10.27
*
Summary of Changes to Trustee Compensation.
Included as Exhibit 10.1 to the Company’s Form 8-K dated September 21, 2005, filed on September 27, 2005.
10.28
*
The Equity Residential Supplemental Executive Retirement Plan as Amended and Restated effective November 1, 2008.
Included as Exhibit 10.4 to the Company’s Form 10-Q for the quarterly period ended September 30, 2008.
10.29
*
Amendment to the Equity Residential Supplemental Executive Retirement Plan.
Included as Exhibit 10.1 to the Company’s Form 10-Q for the quarterly period ended June 30, 2010.
10.30
*
The Equity Residential Grandfathered Supplemental Executive Retirement Plan as Amended and Restated effective January 1, 2005.
Included as Exhibit 10.2 to the Company’s Form 10-Q for the quarterly period ended March 31, 2008.
10.31
Amended and Restated Sales Agency Financing Agreement, dated February 3, 2011, among the Company, the Operating Partnership and Merrill Lynch, Pierce, Fenner & Smith Incorporated.
Included as Exhibit 1.1 to the Company’s Form 8-K dated and filed on February 3, 2011.
10.32
Sales Agency Financing Agreement, dated February 3, 2011, among the Company, the Operating Partnership and BNY Mellon Capital Markets, LLC.
Included as Exhibit 1.2 to the Company’s Form 8-K dated and filed on February 3, 2011.
10.33
Amended and Restated Sales Agency Financing Agreement, dated February 3, 2011, among the Company, the Operating Partnership and J.P. Morgan Securities LLC.
Included as Exhibit 1.3 to the Company’s Form 8-K dated and filed on February 3, 2011.
10.34
Amended and Restated Sales Agency Financing Agreement, dated February 3, 2011, among the Company, the Operating Partnership and Morgan Stanley & Co. Incorporated.
Included as Exhibit 1.4 to the Company’s Form 8-K dated and filed on February 3, 2011.
Computation of Ratio of Earnings to Combined Fixed Charges.
Attached herein.
List of Subsidiaries of Equity Residential.
Attached herein.
23.1
Consent of Ernst & Young LLP.
Attached herein.
Power of Attorney.
See the signature page to this report.
31.1
Certification of David J. Neithercut, Chief Executive Officer.
Attached herein.
31.2
Certification of Mark J. Parrell, Chief Financial Officer.
Attached herein.
Exhibit
Description
Location
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 David J. Neithercut, Chief Executive Officer of the Company.
Attached herein.
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 Mark J. Parrell, Chief Financial Officer of the Company.
Attached herein.
XBRL (Extensible Business Reporting Language). The following materials from Equity Residential’s Annual Report on Form 10-K for the year ended December 31, 2010, formatted in XBRL: (i) consolidated balance sheets, (ii) consolidated statements of operations, (iii) consolidated statements of cash flows, (iv) consolidated statements of changes in equity and (v) notes to consolidated financial statements. As provided in Rule 406T of Regulation S-T, this information is furnished and not filed for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934.
Attached herein.
*
Management contracts and compensatory plans or arrangements filed as exhibits to this report are identified by an asterisk.

Market Capitalization: 14947689.632984161
1-Year Return: -0.01444111857563257
252-Day Return: $252_day_return