**UNITEDSTATESSECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C.  20549**

**FORM 10-Q**

| **x**      | ** ** | **QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15  (d) OF** |
|------------|------------|-----------------------------------------------------------|
| ** ** | ** ** | **THE SECURITIES EXCHANGE ACT OF 1934**                   |

 

For the quarterly periodended **JUNE 30, 2007**

OR

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

 

Commission File Number**: 0-24920**

**ERP OPERATING LIMITED PARTNERSHIP**

(Exact Name of Registrantas Specified in its Charter)

| **Illinois**                                                     |   | **36-3894853**                        |
|------------------------------------------------------------------|--------|---------------------------------------|
| (State or Other  Jurisdiction of Incorporation  or Organization) |   | (I.R.S. Employer  Identification No.) |
|                                                             |   |                                  |
| **Two  North Riverside Plaza, Chicago, Illinois**                |   | **60606**                             |
| (Address of  Principal Executive Offices)                        |   | (Zip Code)                            |

 

**(312)474-1300**

(Registrant’s TelephoneNumber, Including Area Code)

 

Indicateby check mark whether the registrant (1) has filed all reports required to befiled by Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days.  Yes  x   No  o  

Indicate by check mark whether the registrant isa large accelerated filer, an accelerated filer, or a non-acceleratedfiler.  See definition of “acceleratedfiler and large accelerated filer” in Rule 12b-2 of the Exchange Act. 

 
| Large accelerated filer  x |   | Accelerated  filer  o |   | Non-accelerated  filer  o |
|--------------------------------------|--------|---------------------------------|--------|-------------------------------------|

 

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

 

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**ERPOPERATING LIMITED PARTNERSHIPCONSOLIDATED BALANCE SHEETS(Amounts in thousands)(Unaudited)**
| ** **                                                | ** ** | **June 30,  2007** | ** **     | **December 31,  2006** | ** ** |
|-----------------------------------------------------------|------------|-------------------------|----------------|-----------------------------|------------|
| **ASSETS**                                                |       |                    | ** **     | ** **                  | ** ** |
| Investment in real  estate                                |       |                    |           |                        |       |
| Land                                                      |       | $                       | 3,582,455      |                        | $          | 3,217,672 |   |
| Depreciable  property                                     |       | 13,855,981              |           | 13,376,359                  |       |
| Projects under  development                               |       | 392,616                 |           | 399,131                     |       |
| Land held for  development                                |       | 313,360                 |           | 242,013                     |       |
| Investment in real  estate                                |       | 18,144,412              |           | 17,235,175                  |       |
| Accumulated  depreciation                                 |       | (3,125,555              | )              | (3,022,480                  | )          |
| Investment in real  estate, net                           |       | 15,018,857              |           | 14,212,695                  |       |
|                                                      |       |                    |           |                        |       |
| Cash and cash  equivalents                                |       | 66,266                  |           | 260,277                     |       |
| Investments in  unconsolidated entities                   |       | 4,225                   |           | 4,448                       |       |
| Deposits — restricted                                |       | 350,934                 |           | 391,825                     |       |
| Escrow deposits —  mortgage                          |       | 21,214                  |           | 25,528                      |       |
| Deferred financing  costs, net                            |       | 54,889                  |           | 43,384                      |       |
| Other assets                                              |       | 152,279                 |           | 124,062                     |       |
| **Total  assets**                                         | ** ** | **$**                   | **15,668,664** | ** **                  | **$**      | **15,062,219** | ** ** |
|                                                      |       |                    |           |                        |       |
| **LIABILITIES AND PARTNERS’  CAPITAL**               |       |                    |           |                        |       |
| Liabilities:                                              |       |                    |           |                        |       |
| Mortgage notes  payable                                   |       | $                       | 3,188,395      |                        | $          | 3,178,223 |   |
| Notes, net                                                |       | 5,363,139               |           | 4,419,433                   |       |
| Lines of credit                                           |       | 780,000                 |           | 460,000                     |       |
| Accounts payable  and accrued expenses                    |       | 111,140                 |           | 96,699                      |       |
| Accrued interest  payable                                 |       | 95,183                  |           | 91,172                      |       |
| Other  liabilities                                        |       | 332,927                 |           | 311,557                     |       |
| Security  deposits                                        |       | 62,812                  |           | 58,072                      |       |
| Distributions  payable                                    |       | 145,112                 |           | 151,382                     |       |
| **Total  liabilities**                                    | ** ** | **10,078,708**          | ** **     | **8,766,538**               | ** ** |
| ** **                                                |       |                    |           |                        |       |
| *Commitments and contingencies*                           |       |                    |           |                        |       |
| **Minority Interests — Partially  Owned Properties** | ** ** | **23,392**              | ** **     | **26,814**                  | ** ** |
|                                                      |       |                    |           |                        |       |
| Partners’ capital:                                   |       |                    |           |                        |       |
| Preference Units                                          |       | 385,681                 |           | 386,574                     |       |
| Preference  Interests and Junior Preference Units         |       | 184                     |           | 11,684                      |       |
| General Partner                                           |       | 4,854,510               |           | 5,511,658                   |       |
| Limited Partners                                          |       | 333,056                 |           | 372,961                     |       |
| Accumulated  other comprehensive loss                     |       | (6,867                  | )              | (14,010                     | )          |
| **Total  partners’ capital**                         | ** ** | **5,566,564**           | ** **     | **6,268,867**               | ** ** |
| **Total  liabilities and partners’ capital**         | ** ** | **$**                   | **15,668,664** | ** **                  | **$**      | **15,062,219** | ** ** |

 

 

**Seeaccompanying notes**

2

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**ERPOPERATING LIMITED PARTNERSHIPCONSOLIDATED STATEMENTS OF OPERATIONS(Amounts in thousands except per OP Unit data)(Unaudited)**
| ** **                                                                                                                                                                                     | ** ** | **Six Months Ended June 30,** | ** ** | **Quarter Ended June 30,** | ** ** |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|---------------------------------------------------|------------|-------------------------------------------|------------|
| ** **                                                                                                                                                                                     | ** ** | **2007**                                          | ** ** | **2006**                                  | ** ** | **2007** | ** ** | **2006** | ** ** |
| **REVENUES**                                                                                                                                                                                   |       |                                              |       |                                      |       |   |   |   |   |
| Rental income                                                                                                                                                                                  |       | $                                                 | 1,037,668  |                                      | $          | 910,242 |   | $ | 529,310 |   | $ | 465,213 |   |
| Fee and asset management                                                                                                                                                                       |       | 4,703                                             |       | 4,807                                     |       | 2,436 |   | 2,320 |   |
|                                                                                                                                                                                           |       |                                              |       |                                      |       |   |   |   |   |
| Total revenues                                                                                                                                                                                 |       | 1,042,371                                         |       | 915,049                                   |       | 531,746 |   | 467,533 |   |
|                                                                                                                                                                                           |       |                                              |       |                                      |       |   |   |   |   |
| **EXPENSES**                                                                                                                                                                                   |       |                                              |       |                                      |       |   |   |   |   |
| Property and maintenance                                                                                                                                                                       |       | 273,801                                           |       | 238,594                                   |       | 136,682 |   | 120,823 |   |
| Real estate taxes and insurance                                                                                                                                                                |       | 112,017                                           |       | 88,963                                    |       | 55,302 |   | 45,132 |   |
| Property management                                                                                                                                                                            |       | 47,254                                            |       | 46,661                                    |       | 22,412 |   | 23,077 |   |
| Fee and asset management                                                                                                                                                                       |       | 4,504                                             |       | 4,326                                     |       | 2,163 |   | 2,158 |   |
| Depreciation                                                                                                                                                                                   |       | 304,052                                           |       | 257,683                                   |       | 155,032 |   | 132,771 |   |
| General and administrative                                                                                                                                                                     |       | 21,515                                            |       | 22,378                                    |       | 11,549 |   | 9,338 |   |
| Impairment                                                                                                                                                                                     |       | 394                                               |       | 805                                       |       | 158 |   | 239 |   |
| Total expenses                                                                                                                                                                                 |       | 763,537                                           |       | 659,410                                   |       | 383,298 |   | 333,538 |   |
| Operating income                                                                                                                                                                               |       | 278,834                                           |       | 255,639                                   |       | 148,448 |   | 133,995 |   |
|                                                                                                                                                                                           |       |                                              |       |                                      |       |   |   |   |   |
| Interest and other income                                                                                                                                                                      |       | 6,228                                             |       | 4,246                                     |       | 3,784 |   | 1,894 |   |
| Interest:                                                                                                                                                                                      |       |                                              |       |                                      |       |   |   |   |   |
| Expense incurred, net                                                                                                                                                                          |       | (233,075                                          | )          | (203,862                                  | )          | (122,019 | ) | (103,120 | ) |
| Amortization of deferred financing costs                                                                                                                                                       |       | (6,162                                            | )          | (4,383                                    | )          | (3,615 | ) | (1,752 | ) |
|                                                                                                                                                                                           |       |                                              |       |                                      |       |   |   |   |   |
| Income before  allocation to Minority Interests, loss from investments in unconsolidated entities,  net gain on sales of unconsolidated entities and land parcels and  discontinued operations |       | 45,825                                            |       | 51,640                                    |       | 26,598 |   | 31,017 |   |
| Allocation to  Minority Interests — Partially Owned Properties                                                                                                                            |       | (779                                              | )          | (2,068                                    | )          | (187 | ) | (547 | ) |
| Loss from  investments in unconsolidated entities                                                                                                                                              |       | (363                                              | )          | (375                                      | )          | (134 | ) | (145 | ) |
| Net gain on  sales of unconsolidated entities                                                                                                                                                  |       | —                                            |       | 352                                       |       | — |   | 23 |   |
| Net gain on  sales of land parcels                                                                                                                                                             |       | 4,516                                             |       | 246                                       |       | 4,516 |   | 246 |   |
| Income from  continuing operations                                                                                                                                                             |       | 49,199                                            |       | 49,795                                    |       | 30,793 |   | 30,954 |   |
| Discontinued  operations, net                                                                                                                                                                  |       | 385,978                                           |       | 526,915                                   |       | 270,038 |   | 140,568 |   |
| Net income                                                                                                                                                                                     |       | $                                                 | 435,177    |                                      | $          | 576,710 |   | $ | 300,831 |   | $ | 171,162 |   |
|                                                                                                                                                                                           |       |                                              |       |                                      |       |   |   |   |   |
| **ALLOCATION  OF NET INCOME:**                                                                                                                                                                 |       |                                              |       |                                      |       |   |   |   |   |
| Preference Units                                                                                                                                                                               |       | $                                                 | 14,840     |                                      | $          | 20,168 |   | $ | 7,416 |   | $ | 10,073 |   |
| Preference  Interests and Junior Preference Units                                                                                                                                              |       | $                                                 | 434        |                                      | $          | 1,556 |   | $ | 211 |   | $ | 457 |   |
| Premium on  redemption of Preference Interests                                                                                                                                                 |       | $                                                 | —     |                                      | $          | 683 |   | $ | — |   | $ | 9 |   |
|                                                                                                                                                                                           |       |                                              |       |                                      |       |   |   |   |   |
| General Partner                                                                                                                                                                                |       | $                                                 | 393,798    |                                      | $          | 517,804 |   | $ | 274,985 |   | $ | 150,084 |   |
| Limited Partners                                                                                                                                                                               |       | 26,105                                            |       | 36,499                                    |       | 18,219 |   | 10,539 |   |
| Net income  available to OP Units                                                                                                                                                              |       | $                                                 | 419,903    |                                      | $          | 554,303 |   | $ | 293,204 |   | $ | 160,623 |   |
|                                                                                                                                                                                           |       |                                              |       |                                      |       |   |   |   |   |
| **Earnings  per OP Unit — basic:**                                                                                                                                                        |       |                                              |       |                                      |       |   |   |   |   |
| Income from  continuing operations available to OP Units                                                                                                                                       |       | $                                                 | 0.11       |                                      | $          | 0.09 |   | $ | 0.08 |   | $ | 0.07 |   |
| Net income  available to OP Units                                                                                                                                                              |       | $                                                 | 1.37       |                                      | $          | 1.79 |   | $ | 0.97 |   | $ | 0.52 |   |
| Weighted average  OP Units outstanding                                                                                                                                                         |       | 307,582                                           |       | 309,678                                   |       | 303,511 |   | 310,017 |   |
| ** **                                                                                                                                                                                     |       |                                              |       |                                      |       |   |   |   |   |
| **Earnings  per OP Unit — diluted:**                                                                                                                                                      |       |                                              |       |                                      |       |   |   |   |   |
| Income from  continuing operations available to OP Units                                                                                                                                       |       | $                                                 | 0.11       |                                      | $          | 0.09 |   | $ | 0.08 |   | $ | 0.06 |   |
| Net income  available to OP Units                                                                                                                                                              |       | $                                                 | 1.35       |                                      | $          | 1.76 |   | $ | 0.95 |   | $ | 0.51 |   |
| Weighted average  OP Units outstanding                                                                                                                                                         |       | 311,963                                           |       | 314,420                                   |       | 307,631 |   | 314,698 |   |
|                                                                                                                                                                                           |       |                                              |       |                                      |       |   |   |   |   |
| Distributions declared  per OP Unit outstanding                                                                                                                                                |       | $                                                 | 0.9250     |                                      | $          | 0.8850 |   | $ | 0.4625 |   | $ | 0.4425 |   |

 

 

**Seeaccompanying notes**

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**ERP OPERATINGLIMITED PARTNERSHIPCONSOLIDATED STATEMENTS OF OPERATIONS (Continued)(Amounts in thousands except per OP Unit data)(Unaudited)**
| ** **                                                           | ** ** | **Six Months Ended June 30,** | ** ** | **Quarter Ended June 30,** | ** ** |
|----------------------------------------------------------------------|------------|---------------------------------------------------|------------|-------------------------------------------|------------|
| ** **                                                           | ** ** | **2007**                                          | ** ** | **2006**                                  | ** ** | **2007** | ** ** | **2006** | ** ** |
|                                                                 |       |                                              |       |                                      |       |   |   |   |   |
| Comprehensive  income:                                               |       |                                              |       |                                      |       |   |   |   |   |
| Net income                                                           |       | $                                                 | 435,177    |                                      | $          | 576,710 |   | $ | 300,831 |   | $ | 171,162 |   |
| Other comprehensive income — derivative and other  instruments: |       |                                              |       |                                      |       |   |   |   |   |
| Unrealized holding gains arising during the period                   |       | 6,091                                             |       | 2,409                                     |       | 6,212 |   | 886 |   |
| Losses reclassified into earnings from other  comprehensive income   |       | 1,052                                             |       | 1,136                                     |       | 489 |   | 547 |   |
| Comprehensive income                                                 |       | $                                                 | 442,320    |                                      | $          | 580,255 |   | $ | 307,532 |   | $ | 172,595 |   |

 

 

**Seeaccompanying notes**

4

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**ERP OPERATINGLIMITED PARTNERSHIPCONSOLIDATED STATEMENTS OF CASH FLOWS(Amounts in thousands)(Unaudited)**
| ** **                                                                           | ** ** | **Six Months Ended June 30,** | ** ** |
|--------------------------------------------------------------------------------------|------------|---------------------------------------------------|------------|
| ** **                                                                           | ** ** | **2007**                                          | ** ** | **2006** | ** ** |
| **CASH  FLOWS FROM OPERATING ACTIVITIES:**                                           | ** ** | ** **                                        | ** ** | ** ** | ** ** |
| Net income                                                                           |       | $                                                 | 435,177    |   | $ | 576,710 |   |
| *Adjustments  to reconcile net income to net cash provided by operating activities:* |       |                                              |       |   |   |
| Allocation to Minority Interests — Partially Owned Properties                   |       | 779                                               |       | 2,068 |   |
| Depreciation                                                                         |       | 311,741                                           |       | 297,472 |   |
| Amortization of deferred financing costs                                             |       | 7,484                                             |       | 5,146 |   |
| Amortization of discounts and premiums on debt                                       |       | (2,686                                            | )          | (3,644 | ) |
| Amortization of deferred settlements on derivative  instruments                      |       | 362                                               |       | 446 |   |
| Impairment                                                                           |       | 394                                               |       | 1,156 |   |
| Loss from investments in unconsolidated entities                                     |       | 363                                               |       | 375 |   |
| Distributions from unconsolidated entities — return  on capital                 |       | 47                                                |       | 101 |   |
| Net (gain) on sales of  unconsolidated entities                                      |       | —                                            |       | (352 | ) |
| Net (gain) on sales of land parcels                                                  |       | (4,516                                            | )          | (246 | ) |
| Net (gain) on sales of discontinued operations                                       |       | (385,323                                          | )          | (502,297 | ) |
| Loss on debt extinguishments                                                         |       | 3,041                                             |       | 2,892 |   |
| Unrealized (gain) on  derivative instruments                                         |       | (1                                                | )          | — |   |
| Compensation paid with Company  Common Shares                                        |       | 10,243                                            |       | 10,858 |   |
| Other operating activities,  net                                                     |       | —                                            |       | (1 | ) |
| * *                                                                             |       |                                              |       |   |   |
| *Changes  in assets and liabilities:*                                                |       |                                              |       |   |   |
| (Increase) in deposits — restricted                                             |       | (837                                              | )          | (9,570 | ) |
| (Increase) decrease in other assets                                                  |       | (6,741                                            | )          | 8,525 |   |
| Increase in accounts payable and accrued expenses                                    |       | 5,828                                             |       | 9,272 |   |
| Increase in accrued interest payable                                                 |       | 4,011                                             |       | 7,931 |   |
| (Decrease) in other liabilities                                                      |       | (28,313                                           | )          | (48,065 | ) |
| Increase in security deposits                                                        |       | 4,740                                             |       | 4,954 |   |
| Net cash provided by operating activities                                            |       | 355,793                                           |       | 363,731 |   |
|                                                                                 |       |                                              |       |   |   |
| **CASH  FLOWS FROM INVESTING ACTIVITIES:**                                           |       |                                              |       |   |   |
| Investment in real estate — acquisitions                                        |       | (1,142,440                                        | )          | (907,963 | ) |
| Investment in real estate — development/other                                   |       | (195,354                                          | )          | (122,771 | ) |
| Improvements to real estate                                                          |       | (117,845                                          | )          | (106,441 | ) |
| Additions to non-real estate property                                                |       | (4,185                                            | )          | (4,086 | ) |
| Interest capitalized for real estate under  development                              |       | (17,894                                           | )          | (7,780 | ) |
| Proceeds from disposition of real estate, net                                        |       | 839,114                                           |       | 1,002,714 |   |
| Proceeds from disposition of unconsolidated entities                                 |       | —                                            |       | 355 |   |
| Investments in unconsolidated entities                                               |       | (187                                              | )          | (1,030 | ) |
| Distributions from unconsolidated entities — return  of capital                 |       | —                                            |       | 92 |   |
| Decrease in deposits on real estate acquisitions,  net                               |       | 178,246                                           |       | 10,178 |   |
| Decrease in mortgage deposits                                                        |       | 4,314                                             |       | 6,794 |   |
| *Consolidation of previously Unconsolidated  Properties:*                            |       |                                              |       |   |   |
| Via EITF 04-5 (cash consolidated)                                                    |       | —                                            |       | 1,436 |   |
| Acquisition of Minority Interests — Partially Owned  Properties                 |       | —                                            |       | (13 | ) |
| Other investing activities, net                                                      |       | —                                            |       | 2 |   |
| Net cash (used  for) investing activities                                            |       | (456,231                                          | )          | (128,513 | ) |
|                                                                                      |            |                                                   |            |  |  |  |  |

 

 

**Seeaccompanying notes**

5

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**ERP OPERATINGLIMITED PARTNERSHIPCONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)(Amounts in thousands)(Unaudited)**
| ** **                                                                 | ** ** | **Six Months Ended June 30,** | ** ** |
|----------------------------------------------------------------------------|------------|---------------------------------------------------|------------|
| ** **                                                                 | ** ** | **2007**                                          | ** ** | **2006** | ** ** |
| **CASH  FLOWS FROM FINANCING ACTIVITIES:**                                 |       |                                              |       |   |   |
| Loan and bond acquisition costs                                            |       | $                                                 | (19,384    | ) | $ | (4,880 | ) |
| * Mortgage  notes payable:*                                           |       |                                              |       |   |   |
| Proceeds                                                                   |       | 262,026                                           |       | 208,937 |   |
| Restricted cash                                                            |       | (139,262                                          | )          | (19,196 | ) |
| Lump sum payoffs                                                           |       | (310,128                                          | )          | (232,532 | ) |
| Scheduled principal repayments                                             |       | (12,507                                           | )          | (13,644 | ) |
| Prepayment premiums/fees                                                   |       | (3,041                                            | )          | (2,892 | ) |
| *Notes, net:*                                                              |       |                                              |       |   |   |
| Proceeds                                                                   |       | 993,031                                           |       | 398,052 |   |
| Lump sum payoffs                                                           |       | (50,000                                           | )          | — |   |
| *Lines of credit:*                                                         |       |                                              |       |   |   |
| Proceeds                                                                   |       | 10,703,000                                        |       | 3,207,500 |   |
| Repayments                                                                 |       | (10,383,000                                       | )          | (3,429,500 | ) |
| Proceeds from settlement of derivative instruments                         |       | 2,370                                             |       | 10,729 |   |
| Proceeds from sale of OP Units                                             |       | 4,520                                             |       | 5,218 |   |
| Proceeds from exercise of EQR options                                      |       | 9,751                                             |       | 24,159 |   |
| OP Units repurchased and retired                                           |       | (837,334                                          | )          | (81,981 | ) |
| Redemption of Preference Interests                                         |       | —                                            |       | (25,500 | ) |
| Premium on redemption of Preference Interests                              |       | —                                            |       | (9 | ) |
| Payment of offering costs                                                  |       | (137                                              | )          | (23 | ) |
| Other financing activities, net                                            |       | (7                                                | )          | - |   |
| Contributions — Minority Interests — Partially Owned  Properties |       | 6,941                                             |       | 3,327 |   |
| *Distributions:*                                                           |       |                                              |       |   |   |
| OP Units — General Partner                                            |       | (271,049                                          | )          | (256,591 | ) |
| Preference Units                                                           |       | (14,856                                           | )          | (21,243 | ) |
| Preference Interests and Junior Preference Units                           |       | (446                                              | )          | (1,609 | ) |
| OP Units — Limited Partners                                           |       | (18,149                                           | )          | (18,012 | ) |
| Minority Interests — Partially Owned Properties                       |       | (15,912                                           | )          | (2,184 | ) |
| Net cash (used for) financing activities                                   |       | (93,573                                           | )          | (251,874 | ) |
| Net (decrease) in cash and cash equivalents                                |       | (194,011                                          | )          | (16,656 | ) |
| Cash and cash equivalents, beginning of period                             |       | 260,277                                           |       | 88,828 |   |
| Cash and cash equivalents, end of period                                   |       | $                                                 | 66,266     |   | $ | 72,172 |   |

 

 

**Seeaccompanying notes**

6

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**ERP OPERATINGLIMITED PARTNERSHIPCONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)(Amounts in thousands)(Unaudited)**

 
| ** **                                                                         | ** ** | **Six Months Ended June 30,** | ** ** |
|------------------------------------------------------------------------------------|------------|---------------------------------------------------|------------|
| ** **                                                                         | ** ** | **2007**                                          | ** ** | **2006** | ** ** |
| ** **                                                                         | ** ** | ** **                                        | ** ** | ** ** | ** ** |
| **SUPPLEMENTAL  INFORMATION:**                                                     | ** ** | ** **                                        | ** ** | ** ** | ** ** |
| Cash paid during  the period for interest                                          |       | $                                                 | 251,180    |   | $ | 222,774 |   |
| Net cash paid  (received) during the period for income, franchise and excise taxes |       | $                                                 | (733       | ) | $ | 7,509 |   |
|                                                                               |       |                                              |       |   |   |
| *Real  estate acquisitions/dispositions/other:*                                    | * *   | * *                                          | * *   | * * | * * |
| Mortgage loans assumed                                                             |       | $                                                 | 152,697    |   | $ | 63,243 |   |
| Valuation of OP Units issued                                                       |       | $                                                 | —     |   | $ | 46,472 |   |
| Mortgage loans (assumed) by purchaser                                              |       | $                                                 | (76,744    | ) | $ | (117,949 | ) |
|                                                                               |       |                                              |       |   |   |
| *Consolidation  of previously Unconsolidated Properties — Via EITF 04-5:*     | * *   | * *                                          | * *   | * * | * * |
| Investment in real estate, net                                                     |       | $                                                 | —     |   | $ | (24,637 | ) |
| Mortgage loans consolidated                                                        |       | $                                                 | —     |   | $ | 22,545 |   |
| Investments in unconsolidated entities                                             |       | $                                                 | —     |   | $ | 2,602 |   |
| Net other  liabilities recorded                                                    |       | $                                                 | —     |   | $ | 926 |   |

 

 

**Seeaccompanying notes**

** **

7

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**ERP OPERATING LIMITED PARTNERSHIP**

**NOTES TO CONSOLIDATED FINANCIALSTATEMENTS**

**(Unaudited)**

**1.****                                  Business**

ERP Operating LimitedPartnership (“ERPOP”), an Illinois limited partnership, was formed in May 1993to conduct the multifamily residential property business of Equity Residential(“EQR”).  EQR, a Maryland real estateinvestment trust (“REIT”) formed in March 1993, is an S&P 500 companyfocused on the acquisition, development and management of high qualityapartment 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 June 30, 2007owned an approximate 93.6% ownership interest in, ERPOP. EQR is structured asan umbrella partnership REIT (“UPREIT”), under which all property ownership andbusiness operations are conducted through ERPOP and its subsidiaries.  References to the “Operating Partnership”include ERPOP and those entities owned or controlled by it.  References to the “Company” mean EQR and theOperating Partnership.

As of June 30, 2007, theOperating Partnership, directly or indirectly through investments in titleholding entities, owned all or a portion of 608****propertiesin 24 states and the District of Columbia consisting of 162,532 units.   The ownership breakdown includes (table doesnot include various uncompleted development properties):

|                                 | ** ** | **Properties** | ** ** | **Units** | ** ** |
|---------------------------------|------------|----------------|------------|-----------|------------|
| Wholly Owned Properties         |       | 535            |       | 142,620   |       |
| Partially Owned  Properties:    |       |           |       |      |       |
| Consolidated                    |       | 27             |       | 5,445     |       |
| Unconsolidated                  |       | 45             |       | 10,846    |       |
| Military Housing (Fee  Managed) |       | 1              |       | 3,621     |       |
|                            |       | 608            |       | 162,532   |       |

 

**2.**                                     Summary ofSignificant Accounting Policies

*Basis of Presentation*

The accompanying unaudited condensed consolidatedfinancial statements have been prepared in accordance with accountingprinciples generally accepted in the United States for interim financialinformation and with the instructions to Form 10-Q and Article 10 of RegulationS-X.  Accordingly, they do not includeall of the information and footnotes required by accounting principlesgenerally accepted in the United States for complete financial statements.  In the opinion of management, all adjustments(consisting of normal recurring accruals) and certain reclassificationsconsidered necessary for a fair presentation have been included.  Certain reclassifications have been made tothe prior period financial statements in order to conform to the current yearpresentation.  Operating results for thesix months ended June 30, 2007 are not necessarily indicative of the resultsthat may be expected for the year ending December 31, 2007.

The balance sheet at December 31, 2006 has been derivedfrom the audited financial statements at that date but does not include all ofthe information and footnotes required by accounting principles generallyaccepted in the United States for complete financial statements.

For further information, including definitions ofcapitalized terms not defined herein, refer to the consolidated financialstatements and footnotes thereto included in the Operating Partnership’s annualreport on Form 10-K for the year ended December 31, 2006.

8

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*Income Taxes*

The Operating Partnership generally is not liablefor federal income taxes as the partners recognize their proportionate share ofthe Operating Partnership’s income or loss in their tax returns; therefore noprovision for federal income taxes has been made at the ERPOP level.  Historically, the Operating Partnership hasgenerally only incurred certain state and local income, excise and franchisetaxes.  The Operating Partnership haselected Taxable REIT Subsidiary (“TRS”) status for certain of its corporatesubsidiaries, primarily those entities engaged in condominium conversion andcorporate housing activities and as a result, these entities will incur bothfederal and state income taxes on any income of such entities.

Deferred tax assets and liabilities are recognizedfor future tax consequences attributable to differences between the financialstatement carrying amounts of existing assets and liabilities and theirrespective tax bases.  These assets andliabilities are measured using enacted tax rates for which the temporarydifferences are expected to be recovered or settled.  The effect of deferred tax assets andliabilities are recognized in earnings in the period enacted.  As of June 30, 2007, the OperatingPartnership has recorded a deferred tax asset which was fully offset by avaluation allowance.

*Other*

The Company adopted SFAS No. 123(R), *Share-Based Payment*, as required effective January 1, 2006,which requires all companies to expense share-based compensation, such as shareoptions.  As the Company began expensingall share-based compensation effective January 1, 2003, the adoption of SFASNo. 123(R) did not have a material effect on its consolidated statements ofoperations or financial position.

Any EQR common share of beneficial interest, $0.01 parvalue per share (the “Common Shares”) issued pursuant to EQR’s incentive equitycompensation and employee share purchase plans will result in the OperatingPartnership issuing units of limited partnership interest (“OP Units”) to EQRon a one-for-one basis, with the Operating Partnership receiving the net cashproceeds of such issuances.

TheOperating Partnership adopted the disclosure provisions of SFAS No. 150 and FSPNo. FAS 150-3, *Accounting for Certain Financial Instrumentswith Characteristics of both Liabilities and Equity,* effectiveDecember 31, 2003.  SFAS No. 150 and FSPNo. FAS 150-3 require the Operating Partnership to make certain disclosuresregarding noncontrolling interests that are classified as equity in thefinancial statements of a subsidiary but would be classified as a liability inthe parent’s financial statements under SFAS No. 150 (e.g., minority interestsin consolidated limited-life subsidiaries). The Operating Partnership is presently the controlling partner invarious consolidated partnerships consisting of 27 properties and 5,445 unitsand various uncompleted development properties having a minority interest bookvalue of $23.4 million at June 30, 2007. Some of these partnerships contain provisions that require thepartnerships to be liquidated through the sale of its assets upon reaching adate specified in each respective partnership agreement.  The Operating Partnership, as controllingpartner, has an obligation to cause the property owning partnerships todistribute proceeds of liquidation to the Minority Interests in these PartiallyOwned Properties only to the extent that the net proceeds received by thepartnerships from the sale of its assets warrant a distribution based on thepartnership agreements.  As of June 30,2007, the Operating Partnership estimates the value of Minority Interestdistributions would have been approximately $110.5 million (“Settlement Value”)had the partnerships been liquidated. This Settlement Value is based on estimated third party considerationrealized by the partnerships upon disposition of the Partially Owned Propertiesand is net of all other assets and liabilities, including yield maintenance onthe mortgages encumbering the properties, that would have been due on June 30,2007 had those mortgages been prepaid. Due to, among other things, the inherent uncertainty in the sale of realestate assets, the amount of any potential distribution to the Minority Interestsin the Operating Partnership’s Partially Owned Properties is subject tochange.  To the extent that thepartnerships’ underlying assets are worth less than the underlying liabilities,the Operating Partnership has no obligation to remit any consideration to theMinority Interests in Partially Owned Properties.

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TheOperating Partnership adopted EITF Issue No. 04-5, *DeterminingWhether a General Partner, or the General Partners as a Group, Controls aLimited Partnership or Similar Entity When the Limited Partners Have CertainRights* (“Issue 04-5”), effective January 1, 2006.  Issue 04-5 provides guidance in determiningwhether a general partner controls a limited partnership.  The Operating Partnership consolidated its Lexfordsyndicated portfolio consisting of 20 separate partnerships (10 properties)containing 1,272 units, all of which were sold October 5, 2006.  The adoption did not have a material effecton the results of operations or financial position.

InJuly 2006, the FASB ratified the consensus in FIN No. 48, *Accountingfor Uncertainty in Income Taxes*. FIN No. 48 creates a single model to address uncertainty in income taxpositions and prescribes a minimum recognition threshold a tax position isrequired to meet before being recognized in the financial statements.  It also provides guidance on derecognition,measurement, classification, interest and penalties, accounting in interimperiods, disclosure and transition, and clearly scopes income taxes out of SFASNo. 5, *Accounting for Contingencies*.  The Operating Partnership adopted FIN No. 48as required effective January 1, 2007. The adoption of FIN No. 48 did not have a material effect on theconsolidated results of operations or financial position.

## 3.                                       **Partners’ Capital**

## The following tables present the changes in the OperatingPartnership’s issued and outstanding OPUnits and the limited partners’ OP Units for the six months ended June 30,2007:

 

|                                              | ** ** | **2007**        | ** ** |
|----------------------------------------------|------------|-----------------|------------|
|                                         |       |            |       |
| OP Units  outstanding at January 1,          |       | 313,466,216     |       |
|                                         |       |            |       |
| Issued to  General Partner:                  |       |            |       |
| Conversion of  Series E Preference Units     |       | 36,831          |       |
| Conversion of  Series H Preference Units     |       | 3,764           |       |
| Conversion of  Series J Preference Interests |       | 324,484         |       |
| Exercise of EQR  options                     |       | 304,588         |       |
| Employee Share  Purchase Plan                |       | 106,617         |       |
| Restricted EQR  share grants, net            |       | 392,696         |       |
|                                         |       |            |       |
| OP Units Other:                              |       |            |       |
| Repurchased and  retired                     |       | (18,460,206     | )          |
|                                         |       |            |       |
| **OP Units outstanding at June  30,**        | ** ** | **296,174,990** | ** ** |

 

|                                                                       | ** ** | **2007**       | ** ** |
|-----------------------------------------------------------------------|------------|----------------|------------|
|                                                                  |       |           |       |
| Limited Partner  OP Units outstanding at January 1,                   |       | 19,914,583     |       |
| Conversion of  Limited Partner OP Units to EQR Common Shares          |       | (874,143       | )          |
| **Limited  Partner OP Units Outstanding at June 30,**                 | ** ** | **19,040,440** | ** ** |
| Limited Partner OP  Units Ownership Interest in Operating Partnership |       | 6.4            | %          |

** **

**On April 27, 2007, EQR’s Board ofTrustees approved an increase of $200.1 million to the Company’s authorizedshare repurchase program.  On May 24,2007, EQR’s Board of Trustees approved an additional $500.0 million sharerepurchase program.  Considering theabove additional authorizations and the repurchase activity for the six monthsended June 30, 2007, the Company has $335.8 million remaining available forshare repurchases as of June 30, 2007.**

**During the six months ended June30, 2007, the Company repurchased 18,460,206 of its Common Shares at an averageprice of $46.91 per share for total consideration of $866.0 million, of which$837.3 million was paid in cash during the six months ended June 30, 2007 and$28.7 million was accrued for at June 30, 2007 (see below).  These shares were retired subsequent to therepurchase. Concurrent with these transactions, the**

10

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**OperatingPartnership repurchased and retired 18,460,206 OP Units previously issued toEQR.  Of the total shares repurchased,81,106 shares were repurchased at an average price of $54.33 per share to coverthe minimum statutory tax withholding obligations related to the vesting ofemployees’ restricted shares.  Theremaining 18,379,100 shares were repurchased in the open market at an averageprice of $46.88 per share.  As of June30, 2007, transactions to repurchase 627,300 of the 18,460,206 Common Shareshad not yet settled.  As of June 30,2007, the**OperatingPartnershiphas reduced the number of OP Units issued and outstanding by this amount andrecorded a liability of $28.7 million included in other liabilities on theconsolidated balance sheets.

**TheLimited Partners of the Operating Partnership as of June 30, 2007 includevarious individuals and entities that contributed their properties to theOperating Partnership in exchange for OP Units. Subject to certain restrictions, the Limited Partners may exchange theirOP Units for EQR Common Shares on a one-for-one basis.**

**EQRcontributes all net proceeds from its various equity offerings (includingproceeds from exercise of options for EQR Common Shares) to the OperatingPartnership.  In return for thosecontributions, EQR receives a number of OP Units in ERPOP equal to the numberof Common Shares it has issued in the equity offering (or in the case of apreferred equity offering, a number of preference units in ERPOP equal innumber and having the same terms as the preferred shares issued in the equityoffering).**

The followingtable presents the Operating Partnership’s issued and outstanding “PreferenceUnits” as of June 30, 2007 and December 31, 2006:
| ** **                                                                                                                                                                                            | ** ** | ** **                             | ** ** | ** **                    | ** ** | **Annual**                           | ** ** | **Amounts in thousands** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------------------------------------|------------|-------------------------------|------------|--------------------------------------|------------|-------------------------------|------------|
| ** **                                                                                                                                                                                            | ** ** | **Redemption  Date (1) (2)** | ** ** | **Conversion  Rate (2)** | ** ** | **Dividend per  Unit (3)** | ** ** | **June  30, 2007**       | ** ** | **December  31, 2006** | ** ** |
| Preference  Units:                                                                                                                                                                                    |       |                                   |       |                          |       |                                 |       |                          |       |   |   |
|                                                                                                                                                                                                  |       |                                   |       |                          |       |                                 |       |                          |       |   |   |
|  8.60% Series D Cumulative Redeemable  Preference Units; liquidation value $250 per unit; 700,000 units issued and  outstanding at June 30, 2007 and December 31, 2006                           |       | 7/15/07                                |       | N/A                           |       | (5                                   | )          | $                             | 175,000    |   | $ | 175,000 |   |
|                                                                                                                                                                                                  |       |                                   |       |                          |       |                                 |       |                          |       |   |   |
|  7.00% Series E Cumulative Convertible  Preference Units; liquidation value $25 per unit; 401,716 and 434,816 units  issued and outstanding at June 30, 2007 and December 31, 2006, respectively |       | 11/1/98                                |       | 1.1128                        |       | $                                    | 1.75       |                          | 10,043     |   | 10,871 |   |
|                                                                                                                                                                                                  |       |                                   |       |                          |       |                                 |       |                          |       |   |   |
|  7.00% Series H Cumulative Convertible  Preference Units; liquidation value $25 per unit; 25,534 and 28,134 units  issued and outstanding at June 30, 2007 and December 31, 2006, respectively   |       | 6/30/98                                |       | 1.4480                        |       | $                                    | 1.75       |                          | 638        |   | 703 |   |
|                                                                                                                                                                                                  |       |                                   |       |                          |       |                                 |       |                          |       |   |   |
|  8.29% Series K Cumulative Redeemable  Preference Units; liquidation value $50 per unit; 1,000,000 units issued and  outstanding at June 30, 2007 and December 31, 2006                          |       | 12/10/26                               |       | N/A                           |       | $                                    | 4.145      |                          | 50,000     |   | 50,000 |   |
|                                                                                                                                                                                                  |       |                                   |       |                          |       |                                 |       |                          |       |   |   |
|  6.48% Series N Cumulative Redeemable  Preference Units; liquidation value $250 per unit; 600,000 units issued and  outstanding at June 30, 2007 and December 31, 2006 (4)                       |       | 6/19/08                                |       | N/A                           |       | $                                    | 16.20      |                          | 150,000    |   | 150,000 |   |
|                                                                                                                                                                                                  |       |                                   |       |                          |       |                                 |       |                          |       |   |   |
|                                                                                                                                                                                                  |       |                                   |       |                          |       |                                 |       | $                             | 385,681    |   | $ | 386,574 |   |

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(1)                      On or after the redemption date, redeemablepreference units (Series K and N) may be redeemed for cash at the option of theOperating Partnership, in whole or in part, at a redemption price equal to theliquidation price per unit, plus accrued and unpaid distributions, if any, inconjunction with the concurrent redemption of the corresponding EQR PreferredShares.

(2)                      On or after the redemption date, convertiblepreference units (Series E & H) may be redeemed under certain circumstancesat the option of the Operating Partnership for cash (in the case of Series E)or OP Units (in the case of Series H), in whole or 

11

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in part, at various redemption prices per unitbased upon the contractual conversion rate, plus accrued and unpaiddistributions, if any, in conjunction with the concurrent redemption/conversionof the corresponding EQR Preferred Shares.

(3)                      Dividends on all series of Preference Unitsare payable quarterly at various pay dates. The dividend listed for Series N is a Preference Unit rate and theequivalent depositary unit annual dividend is $1.62 per unit.

(4)                      The series N Preference Units have acorresponding depositary unit that consists of ten times the number of unitsand one-tenth the liquidation value and dividend per unit.

(5)                      On May 25, 2007, the Operating Partnershipissued an irrevocable notice to redeem for cash on July 16, 2007 all 700,000units of its Series D Preference Units in conjunction with the concurrentredemption of the corresponding EQR Preferred Shares.   The Operating Partnership will record thewrite-off of approximately $6.1 million in original costs as a premium on redemptionof Preference Units in the third quarter of 2007.

The following table presents theissued and outstanding Preference Interests as of June 30, 2007 and December31, 2006:
| ** **                                                                                                                                                                                            | ** ** | ** **                             | ** ** | ** **                    | ** ** | ** **                                       | ** ** | **Amounts in thousands** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------------------------------------|------------|-------------------------------|------------|--------------------------------------------------|------------|------------------------------------|------------|
| ** **                                                                                                                                                                                            | ** ** | **Redemption  Date (1) (2)** | ** ** | **Conversion  Rate (2)** | ** ** | **Annual  Dividend per Unit (3)** | ** ** | **June  30, 2007**            | ** ** | **December  31, 2006** | ** ** |
| Preference  Interests:                                                                                                                                                                                |       |                                   |       |                          |       |                                             |       |                               |       |   |   |
|                                                                                                                                                                                                  |       |                                   |       |                          |       |                                             |       |                               |       |   |   |
| 7.625% Series J  Cumulative Convertible Redeemable Preference Units; liquidation value $50 per  unit; 0 and 230,000 units issued and outstanding at June 30, 2007 and December 31, 2006, respectively |       | 12/14/06                               |       | 1.4108                        |       | (4)                                              |       | $                                  | —     |   | $ | 11,500 |   |
|                                                                                                                                                                                                  |       |                                   |       |                          |       |                                             |       | $                                  | —     |   | $ | 11,500 |   |

 

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(1)                      On or after the fifth anniversary of theissuance (the “Redemption Date”), the Series J Preference Interests wereredeemable for cash at the option of the Operating Partnership, in whole or inpart, at any time or from time to time, at a redemption price equal to theliquidation preference of $50.00 per unit plus the cumulative amount of accruedand unpaid distributions, if any.

(2)                      On or after the tenth anniversary of the issuance(the “Conversion Date”), the Series J Preference Interests were exchangeable atthe option of the holder (in whole but not in part) on a one-for-one basis fora respective reserved series of EQR Preferred Share. In addition, on or afterthe Conversion Date, the Series J Preference Interests were convertible undercertain circumstances at the option of the holder (in whole but not in part) toCommon Shares based upon the contractual conversion rate, plus accrued andunpaid distributions, if any.  Prior tothe Conversion Date, the Series J Preference Interests were convertible undercertain circumstances at the option of the holder (in whole but not in part) toCommon Shares based upon the contractual conversion rate, plus accrued andunpaid distributions, if any, if the issuer called the series for redemption(the “Accelerated Conversion Right”).

(3)                      Dividends on the Series J Preference Interestswere payable quarterly on March 25th, June 25th, September 25th and December 25th ofeach year.

(4)                      On May 24, 2007, the Operating Partnershipissued an irrevocable notice to redeem for cash on June 25, 2007 all 230,000units of its 7.625% Series J Preference Interests with a liquidation value of$11.5 million.  This notice triggered theholder’s Accelerated Conversion Right, which they exercised.  As a result, effective June 25, 2007, the230,000 units were converted into 324,484 EQR Common Shares.

**The following table presents theOperating Partnership’s issued and outstanding Junior Convertible PreferenceUnits (the “Junior Preference Units”) as of June 30, 2007 and December 31,2006:**

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** **
| ** **                                                                                                                                                | ** ** | ** **                    | ** ** | ** **                          | ** ** | ** **                                   | ** ** | **Amounts in thousands** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------------|------------|-------------------------------------|------------|----------------------------------------------|------------|------------------------------------|------------|
| ** **                                                                                                                                                | ** ** | **Redemption  Date (2)** | ** ** | **Conversion   Rate (2)** | ** ** | **Annual  Dividend  per Unit (1)** | ** ** | **June   30, 2007**      | ** ** | **December  31, 2006** | ** ** |
| Junior  Preference Units:                                                                                                                                 |       |                          |       |                                |       |                                         |       |                               |       |   |   |
|                                                                                                                                                      |       |                          |       |                                |       |                                         |       |                               |       |   |   |
| Series B Junior Convertible Preference Units; liquidation  value $25 per unit; 7,367 units issued and outstanding at June 30, 2007 and  December 31, 2006 |       | 07/29/09                      |       | 1.020408                            |       | $   2.00                      |       | $   184             |       | $   184 |   |
|                                                                                                                                                      |       |                          |       |                                |       |                                         |       | $   184             |       | $   184 |   |

 

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(1)                        Dividends on the Junior Preference Units arepayable quarterly at various pay dates.

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

**4.**                             Real Estate

**The following table summarizesthe carrying amounts for investment in real estate (at cost) as of June 30,2007 and December 31, 2006 (Amounts in thousands):**

|                                   | ** ** | **June 30, 2007** | ** ** | **December 31, 2006** | ** ** |
|-----------------------------------|------------|-----------------------------|------------|---------------------------------|------------|
| Land                              |       | $                           | 3,582,455  |                            | $          | 3,217,672 |   |
| Depreciable  property:            |       |                        |       |                            |       |
| Buildings and improvements        |       | 12,970,642                  |       | 12,563,807                      |       |
| Furniture, fixtures and equipment |       | 885,339                     |       | 812,552                         |       |
| Projects under  development:      |       |                        |       |                            |       |
| Land                              |       | 113,513                     |       | 137,505                         |       |
| Construction-in-progress          |       | 279,103                     |       | 261,626                         |       |
| Land held for  development:       |       |                        |       |                            |       |
| Land                              |       | 263,114                     |       | 202,695                         |       |
| Construction-in-progress          |       | 50,246                      |       | 39,318                          |       |
| Investment in  real estate        |       | 18,144,412                  |       | 17,235,175                      |       |
| Accumulated  depreciation         |       | (3,125,555                  | )          | (3,022,480                      | )          |
| Investment in real  estate, net   |       | $                           | 15,018,857 |                            | $          | 14,212,695 |   |

** **

**During the six months ended June30, 2007, the Operating Partnership acquired the following from unaffiliatedparties (purchase price in thousands):**

|                      | ** ** | **Properties** | ** ** | **Units** | ** ** | **Purchase  Price** | ** ** |
|----------------------|------------|----------------|------------|-----------|------------|---------------------|------------|
| Rental  Properties   |       | 28             |       | 6,209     |       | $                   | 1,225,785  |   |
| Land Parcels  (five) |       | —         |       | —    |       | 65,450              |       |
|                 |       | 28             |       | 6,209     |       | $                   | 1,291,235  |   |

 

During the six months ended June 30, 2007, the Operating Partnership disposed of thefollowing to unaffiliated parties (sales price in thousands):

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|                     | ** ** | **Properties** | ** ** | **Units** | ** ** | **Sales Price** | ** ** |
|---------------------|------------|----------------|------------|-----------|------------|----------------------|------------|
| Rental  Properties  |       | 37             |       | 10,018    |       | $                    | 790,629    |   |
| Condominium  Units  |       | 4              |       | 383       |       | 103,058              |       |
| Land Parcels  (one) |       | —         |       | —    |       | 40,662               |       |
|                |       | 41             |       | 10,401    |       | $                    | 934,349    |   |

** **

**The**Operating Partnershiprecognized a net gain on sales of discontinued operations and a net gain onsales of land parcels of approximately $385.3 million and $4.5 million,respectively, on the above sales.

**5.****                                     Commitmentsto Acquire/Dispose of Real Estate**

**As of August 1, 2007, in addition to the properties thatwere subsequently acquired as discussed in Note 16, the**Operating Partnership had entered into separate agreements to acquire thefollowing (purchase price in thousands):

** **

|                       | ** ** | **Properties/  Parcels** | ** ** | **Units** | ** ** | **Purchase  Price** | ** ** |
|-----------------------|------------|--------------------------|------------|-----------|------------|---------------------|------------|
| Operating  Properties |       | 5                        |       | 1,061     |       | $                   | 329,400    |   |
| Land Parcels          |       | 5                        |       | —    |       | 143,653             |       |
| Total                 |       | 10                       |       | 1,061     |       | $                   | 473,053    |   |

** **

**As of August 1, 2007, in addition to the properties thatwere subsequently disposed as discussed in Note 16, the**Operating Partnership had entered into separate agreements to dispose ofthe following (sales price in thousands):

 

|                       | ** ** | **Properties/  Parcels** | ** ** | **Units** | ** ** | **Sales Price** | ** ** |
|-----------------------|------------|--------------------------|------------|-----------|------------|----------------------|------------|
| Operating  Properties |       | 31                       |       | 9,132     |       | $                    | 771,604    |   |
| Land Parcels          |       | 2                        |       | —    |       | 8,200                |       |
| Total                 |       | 33                       |       | 9,132     |       | $                    | 779,804    |   |

 

The closings of these pending transactions are subjectto certain contingencies and conditions; therefore, there can be no assurancethat these transactions will be consummated or that the final terms thereof willnot differ in material respects from those summarized in the precedingparagraphs.

**6.****                                     Investments in Partially Owned Entities**

The OperatingPartnership  has co-invested invarious properties with unrelated third parties which are either consolidatedor accounted for under the equity method of accounting (unconsolidated).  The following table summarizes the OperatingPartnership’s investments in partially owned entities as of June 30, 2007(amounts in thousands except for project and unit amounts):

 

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| ** **               | ** ** | **Consolidated**                                  | ** ** | **Unconsolidated**                               | ** ** |
|--------------------------|------------|---------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **               | ** ** | **Development Projects**                     | ** ** | ** **                                       | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **               | ** ** | **Held for  and/or Under  Development** | ** ** | **Completed, Not**

**Stabilized (4)** | ** ** | **Completed  and Stabilized** | ** ** | **Other** | ** ** | **Total** | ** ** | **Institutional  Joint Ventures** | ** ** |
|                     |       |                                              |       |                                             |       |   |   |   |   |   |   |   |   |
| Total projects (1)       |       | —                                            |       | 2                                                |       | 4 |   | 21 |   | 27 |   | 45 |   |
|                     |       |                                              |       |                                             |       |   |   |   |   |   |   |   |   |
| Total units (1)          |       | —                                            |       | 572                                              |       | 977 |   | 3,896 |   | 5,445 |   | 10,846 |   |
|                     |       |                                              |       |                                             |       |   |   |   |   |   |   |   |   |
| Debt — Secured (2): |       |                                              |       |                                             |       |   |   |   |   |   |   |   |   |
| EQR Ownership  (3)       |       | $                                                 | 262,878    |                                             | $          | 97,596 |   | $ | 61,000 |   | $ | 286,891 |   | $ | 708,365 |   | $ | 121,200 |   |
| Minority  Ownership      |       | —                                            |       | —                                           |       | — |   | 13,321 |   | 13,321 |   | 363,600 |   |
| Total (at 100%)          |       | $                                                 | 262,878    |                                             | $          | 97,596 |   | $ | 61,000 |   | $ | 300,212 |   | $ | 721,686 |   | $ | 484,800 |   |

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(1)                                 Project and unit counts exclude alluncompleted development projects until those projects are substantiallycompleted.

(2)                                 All debt is non-recourse to the OperatingPartnership with the exception of $28.3 million in mortgage bonds on onedevelopment project.

(3)                                 Represents the Operating Partnership’s currenteconomic ownership interest.

(4)                                 Projects included here are substantiallycomplete.  However, they may still requireadditional exterior and interior work for all units to be available forleasing.

 

**7.****                                       Deposits — Restricted**

The following table presents the deposits — restrictedas of June 30, 2007 and December 31, 2006 (amounts in thousands):

|                                         | ** ** | **June 30,  2007** | ** ** | **December 31,  2006** | ** ** |
|-----------------------------------------|------------|-------------------------|------------|-----------------------------|------------|
|                                    |       |                    |       |                        |       |
| Tax-deferred (1031)  exchange proceeds  |       | $                       | 112,588    |                        | $          | 299,392 |   |
| Earnest money on  pending acquisitions  |       | 14,070                  |       | 13,170                      |       |
| Other acquisitions                      |       | 7,658                   |       | —                      |       |
| Restricted deposits on  debt (1)        |       | 159,435                 |       | 22,917                      |       |
| Resident security and  utility deposits |       | 39,852                  |       | 36,260                      |       |
| Other                                   |       | 17,331                  |       | 20,086                      |       |
| Totals                                  |       | $                       | 350,934    |                        | $          | 391,825 |   |

----

(1)                                 Primarilyrepresents amounts held in escrow by the lender and released as draw requestsare made on fully-funded development mortgage loans.

** **

**8.****                                     Mortgage Notes Payable**

As of June 30, 2007, the Operating Partnership hadoutstanding mortgage debt of approximately $3.2 billion.

During the six months ended June 30, 2007, the OperatingPartnership:

·                  Repaid $322.6 million of mortgage loans;

·                  Assumed $152.7 million of mortgage debt oncertain properties in connection with their acquisitions;

·                  Obtained $262.0 million of new mortgage loans oncertain properties; and

·                  Was released from $76.7 million of mortgage debtassumed by the purchaser on disposed properties.

The Operating Partnershiprecorded approximately $3.0 million and $3.4 million of prepayment

15

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penalties and write-offs of unamortized deferredfinancing costs, respectively, as additional interest related to debtextinguishment of mortgages during the six months ended June 30, 2007.

As of June 30, 2007, scheduled maturities for the OperatingPartnership’s outstanding mortgage indebtedness were at various dates throughSeptember 1, 2045.  At June 30, 2007, theinterest rate range on the Operating Partnership’s mortgage debt was 3.32% to12.465%.  During the six months endedJune 30, 2007, the weighted average interest rate on the Operating Partnership’smortgage debt was 5.73%.

**9.****                                     Notes**

As of June 30, 2007, the Operating Partnership had outstandingunsecured notes of approximately $5.4 billion.

During the six months ended June 30, 2007, the Operating Partnership:

·                  Issued $350.0 million of five year 5.50% fixedrate public notes, receiving net proceeds of $346.1million;

·                  Issued $650.0 million of ten year 5.75% fixedrate public notes, receiving net proceeds of $640.6 million; and

·                  Repaid $50.0 million of 7.625% fixed rate publicnotes at maturity.

As of June 30, 2007, scheduled maturities for the Operating Partnership’soutstanding notes were at various dates through 2029.  At June 30, 2007, the interest rate range onthe Operating Partnership’s notes was 3.85% to 7.57%.  During the six months ended June 30, 2007,the weighted average interest rate on the Operating Partnership’s notes was5.66%.

**10.****                              Lines of Credit**

On February 28, 2007, theOperating Partnership entered into an unsecured revolving credit facility withpotential borrowings of up to $1.5 billion maturing on February 28, 2012.  The Operating Partnership has the ability toincrease available borrowings by an additional $500.0 million by addingadditional banks to the facility or obtaining the agreement of existing banksto increase their commitments.  Advancesunder the credit facility bear interest at variable rates based upon LIBOR at variousinterest periods plus a spread dependent upon the Operating Partnership’scredit rating or based on bids received from the lending group.  EQR has guaranteed the Operating Partnership’scredit facility up to the maximum amount and for the full term of the facility.

On April 1, 2005, the OperatingPartnership obtained a three-year $1.0 billion unsecured revolving creditfacility maturing on May 29, 2008. Advances under the credit facility bore interest at variable rates basedupon LIBOR at various interest periods plus a spread dependent upon theOperating Partnership’s credit rating or based on bids received from thelending group.  EQR guaranteed theOperating Partnership’s credit facility up to the maximum amount and for thefull term of the facility.  This creditfacility was repaid in full and terminated on February 28, 2007.  The Operating Partnership recorded $0.4million of write-offs of unamortized deferred financing costs as additionalinterest in connection with this termination.

On May 7, 2007, the OperatingPartnership obtained a one-year $500.0 million unsecured revolving creditfacility maturing on May 5, 2008. Advances under this facility bore interest at variable rates based onLIBOR at various interest periods plus a spread dependent upon the OperatingPartnership’s credit rating.  EQRguaranteed this credit facility up to the maximum amount and for its fullterm.  This credit facility was repaid infull and terminated on June 4, 2007.

As of June 30, 2007, $780.0 million was outstanding and $70.6 millionwas restricted (dedicated to support letters of credit and not available forborrowing) on the $1.5 billion revolving credit facility.  During the 

16

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six months ended June 30, 2007, the weighted average interest rateunder the credit facilities was 5.65%.

**11.****                              Derivative Instruments**

The following table summarizes theconsolidated derivative instruments at June30, 2007 (dollar amounts are inthousands):

|                                         | ** ** | **Fair Value  Hedges (1)** | ** ** | **Development  Cash Flow  Hedges (2)** | ** ** |
|-----------------------------------------|------------|--------------------------------------|------------|--------------------------------------------------|------------|
| Current Notional  Balance               |       | $                                    | 370,000    |                                             | $          | 27,970 |   |
| Lowest Possible  Notional               |       | $                                    | 370,000    |                                             | $          | 17,942 |   |
| Highest Possible  Notional              |       | $                                    | 370,000    |                                             | $          | 131,675 |   |
| Lowest Interest Rate                    |       | 3.245                                | %          | 4.928                                            | %          |
| Highest Interest Rate                   |       | 3.787                                | %          | 5.850                                            | %          |
| Earliest Maturity Date                  |       | 2009                                 |       | 2009                                             |       |
| Latest Maturity Date                    |       | 2009                                 |       | 2009                                             |       |
| Estimated Asset  (Liability) Fair Value |       | $                                    | (12,196    | )                                                | $          | 391 |   |

----

(1)                                 Fair Value Hedges — Converts outstanding fixedrate debt to a floating interest rate.

(2)                                 Development Cash Flow Hedges — Convertsoutstanding floating rate debt to a fixed interest rate (swaps) and/or locks-in a maximum interest rate (caps).

 

**On**June30, 2007, thenet derivative instruments were reported at their fair value as otherliabilities of approximately $12.2 million and other assets of $391,000.  As of June30, 2007,there were approximately $7.7 million in deferred losses, net, included inaccumulated other comprehensive loss. Based on the estimated fair values of the net derivative instruments at June 30, 2007, the Operating Partnership may recognize anestimated $1.8 million of accumulated other comprehensive loss as additionalinterest expense during the twelve months ending June 30, 2008.

**In June 2007, the Operating Partnership receivedapproximately $2.4 million to terminate five forward starting swaps inconjunction with the issuance of $650.0 million of ten year unsecurednotes.  The majority of the $2.4 millionhas been deferred as a component of accumulated other comprehensive loss andwill be recognized as a reduction of interest expense over the life of theunsecured notes.**

**12.**                              Earnings Per OP Unit

The following tables set forth the computation of netincome per OP Unit — basic and net income per OP Unit — diluted (amounts inthousands except per OP Unit amounts):
| ** **                                                          | ** ** | **Six Months Ended**

**June 30,** | ** ** | **Quarter Ended**

**June 30,** | ** ** |
|---------------------------------------------------------------------|------------|---------------------------------------------------|------------|-------------------------------------------|------------|
| ** **                                                          | ** ** | **2007**                                          | ** ** | **2006**                                  | ** ** | **2007** | ** ** | **2006** | ** ** |
| **Numerator for net income per OP  Unit — basic and diluted:** | ** ** | ** **                                        | ** ** | ** **                                | ** ** | ** ** | ** ** | ** ** | ** ** |
| Income from continuing  operations                                  |       | $                                                 | 49,199     |                                      | $          | 49,795 |   | $ | 30,793 |   | $ | 30,594 |   |
| Allocation to  Preference Units                                     |       | (14,840                                           | )          | (20,168                                   | )          | (7,416 | ) | (10,073 | ) |
| Allocation to  Preference Interests and Junior Preference Units     |       | (434                                              | )          | (1,556                                    | )          | (211 | ) | (457 | ) |
| Allocation to premium  on redemption of Preference Interests        |       | —                                            |       | (683                                      | )          | — |   | (9 | ) |
|                                                                |       |                                              |       |                                      |       |   |   |   |   |
| Income from continuing  operations available to OP Units            |       | 33,925                                            |       | 27,388                                    |       | 23,166 |   | 20,055 |   |
| Discontinued  Operations, net                                       |       | 385,978                                           |       | 526,915                                   |       | 270,038 |   | 140,568 |   |
| Numerator for net  income per OP Unit — basic and diluted      |       | $                                                 | 419,903    |                                      | $          | 554,303 |   | $ | 293,204 |   | $ | 160,623 |   |

 

17

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| ** **                                                                                                   | ** ** | **Six Months Ended** | ** ** | **Quarter Ended** | ** ** |
|--------------------------------------------------------------------------------------------------------------|------------|--------------------------------|------------|------------------------|------------|
| ** **                                                                                                   | ** ** | **June 30,**              | ** ** | **June 30,**      | ** ** |
| ** **                                                                                                   | ** ** | **2007**                       | ** ** | **2006**               | ** ** | **2007** | ** ** | **2006** | ** ** |
| **Denominator for net income per  OP unit — basic and diluted:**                                        | ** ** | ** **                     | ** ** | ** **             | ** ** | ** ** | ** ** | ** ** | ** ** |
| Denominator for net  income per OP Unit — basic                                                         |       | 307,582                        |       | 309,678                |       | 303,511 |   | 310,017 |   |
| Effect of dilutive  securities:                                                                              |       |                           |       |                   |       |   |   |   |   |
| Dilution for OP  Units issuable upon assumed exercise/vesting of EQR’s share  options/restricted shares |       | 4,381                          |       | 4,742                  |       | 4,120 |   | 4,681 |   |
|                                                                                                         |       |                           |       |                   |       |   |   |   |   |
| Denominator for net  income per OP Unit — diluted                                                       |       | 311,963                        |       | 314,420                |       | 307,631 |   | 314,698 |   |
|                                                                                                         |       |                           |       |                   |       |   |   |   |   |
| Net income per OP Unit  — basic                                                                         |       | $                              | 1.37       |                   | $          | 1.79 |   | $ | 0.97 |   | $ | 0.52 |   |
| Net income per OP Unit  — diluted                                                                       |       | $                              | 1.35       |                   | $          | 1.76 |   | $ | 0.95 |   | $ | 0.51 |   |
|                                                                                                         |       |                           |       |                   |       |   |   |   |   |
| **Net income OP Unit — basic:**                                                                         | ** ** | ** **                     | ** ** | ** **             | ** ** | ** ** | ** ** | ** ** | ** ** |
| Income from continuing  operations available to OP Units                                                     |       | $                              | 0.110      |                   | $          | 0.089 |   | $ | 0.076 |   | $ | 0.065 |   |
| Discontinued  operations, net                                                                                |       | 1.256                          |       | 1.702                  |       | 0.891 |   | 0.453 |   |
| Net income per OP Unit  — basic                                                                         |       | $                              | 1.366      |                   | $          | 1.791 |   | $ | 0.967 |   | $ | 0.518 |   |
|                                                                                                         |       |                           |       |                   |       |   |   |   |   |
| **Net income per OP Unit —  diluted:**                                                                  | ** ** | ** **                     | ** ** | ** **             | ** ** | ** ** | ** ** | ** ** | ** ** |
| Income from continuing  operations available to OP Units                                                     |       | $                              | 0.109      |                   | $          | 0.087 |   | $ | 0.075 |   | $ | 0.064 |   |
| Discontinued  operations, net                                                                                |       | 1.237                          |       | 1.676                  |       | 0.878 |   | 0.446 |   |
| Net income per OP Unit  — diluted                                                                       |       | $                              | 1.346      |                   | $          | 1.763 |   | $ | 0.953 |   | $ | 0.510 |   |

* *

*Convertible preference interests/units that could beconverted into 828,112 and 1,443,935 weighted average Common Shares (whichwould be contributed to the Operating Partnership in exchange for OP Units) forthe six months ended June 30, 2007 and 2006, respectively, and 803,346 and1,274,295 weighted average Common Shares for the quarters ended June 30, 2007and 2006, respectively, were outstanding but were not included in thecomputation of diluted earnings per OP Unit because the effects would beanti-dilutive.  In addition, the effectof the Common Shares/OP Units that could ultimately be issued upon theconversion/exchange of the Operating Partnership’s $650.0 million exchangeablesenior notes were not included in the computation of diluted earnings per OPUnit because the effects would be anti-dilutive.*

**13.****                              DiscontinuedOperations**

TheOperating Partnership has presented separately as discontinued operations inall periods the results of operations for all consolidated assets disposed ofon or after January 1, 2002 (the date of adoption of SFAS No. 144) and alloperations related to condominium conversion properties effective upon theirrespective transfer into a TRS.

The components of discontinuedoperations are outlined below and include the results of operations for therespective periods that the Operating Partnership owned such assets during thesix months and quarters ended June 30, 2007 and 2006 (amounts in thousands).

** **

18

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| ** **                                    | ** ** | **Six Months Ended June 30,** | ** ** | **Quarter Ended June 30,** | ** ** |
|-----------------------------------------------|------------|---------------------------------------------------|------------|-------------------------------------------|------------|
| ** **                                    | ** ** | **2007**                                          | ** ** | **2006**                                  | ** ** | **2007** | ** ** | **2006** | ** ** |
| **REVENUES**                                  | ** ** | ** **                                        | ** ** | ** **                                | ** ** | ** ** | ** ** | ** ** | ** ** |
| Rental income                                 |       | $                                                 | 31,880     |                                      | $          | 164,992 |   | $ | 8,591 |   | $ | 75,261 |   |
| Total revenues                                |       | 31,880                                            |       | 164,992                                   |       | 8,591 |   | 75,261 |   |
|                                          |       |                                              |       |                                      |       |   |   |   |   |
| **EXPENSES (1)**                              | ** ** | ** **                                        | ** ** | ** **                                | ** ** | ** ** | ** ** | ** ** | ** ** |
| Property and maintenance                      |       | 15,469                                            |       | 56,322                                    |       | 6,523 |   | 26,571 |   |
| Real estate taxes and  insurance              |       | 4,695                                             |       | 22,000                                    |       | 1,224 |   | 10,014 |   |
| Property management                           |       | 272                                               |       | 5,937                                     |       | 69 |   | 3,146 |   |
| Depreciation                                  |       | 7,689                                             |       | 39,789                                    |       | 2,035 |   | 17,930 |   |
| General and  administrative                   |       | 11                                                |       | 482                                       |       | 9 |   | 271 |   |
| Impairment                                    |       | —                                            |       | 351                                       |       | — |   | 125 |   |
| Total expenses                                |       | 28,136                                            |       | 124,881                                   |       | 9,860 |   | 58,057 |   |
|                                          |       |                                              |       |                                      |       |   |   |   |   |
| Discontinued operating  income (loss)         |       | 3,744                                             |       | 40,111                                    |       | (1,269 | ) | 17,204 |   |
|                                          |       |                                              |       |                                      |       |   |   |   |   |
| Interest and other  income                    |       | 130                                               |       | 1,134                                     |       | 43 |   | 154 |   |
| Interest (2):                                 |       |                                              |       |                                      |       |   |   |   |   |
| Expense  incurred, net                        |       | (1,897                                            | )          | (15,864                                   | )          | (987 | ) | (5,982 | ) |
| Amortization of  deferred financing costs     |       | (1,322                                            | )          | (763                                      | )          | (1,305 | ) | (604 | ) |
|                                          |       |                                              |       |                                      |       |   |   |   |   |
| Discontinued operations                       |       | 655                                               |       | 24,618                                    |       | (3,518 | ) | 10,772 |   |
| Net gain on sales of  discontinued operations |       | 385,323                                           |       | 502,297                                   |       | 273,556 |   | 129,796 |   |
|                                          |       |                                              |       |                                      |       |   |   |   |   |
| Discontinued operations, net                  |       | $                                                 | 385,978    |                                      | $          | 526,915 |   | $ | 270,038 |   | $ | 140,568 |   |

* *

----

| *(1)* | *Includes  expenses paid in the current period for properties sold or held for sale in  prior periods related to the Operating Partnership’s period of ownership.* |
|-------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| *(2)* | *Includes  only interest expense specific to secured mortgage notes payable for  properties sold and/or held for sale.*                                                 |

 

For the properties sold during the six months endedJune 30, 2007 (excluding condominium conversion properties), the investment inreal estate, net of accumulated depreciation, and the mortgage notes payablebalances at December 31, 2006 were $454.8 million and $85.6 million,respectively.

The net real estate basis of the Operating Partnership’s condominiumconversion properties owned by the TRS and included in discontinued operations(excludes the Operating Partnership’s five halted conversions as they are nowheld for use), which were included in investment in real estate, net in theconsolidated balance sheets, was $108.6 million and $95.4 million at June 30,2007 and December 31, 2006, respectively.

**14.****                              Commitments and Contingencies**

The Operating Partnership, as an owner of real estate,is subject to various Federal, state and local environmental laws.  Compliance by the Operating Partnership withexisting laws has not had a material adverse effect on the OperatingPartnership.  However, the OperatingPartnership cannot predict the impact of new or changed laws or regulations onits current properties or on properties that it may acquire in the future.

The Operating Partnership is party to a housingdiscrimination lawsuit brought by a non-profit civil rights organization inApril 2006 in the U.S. District Court for the District of Maryland.  The suit alleges that the OperatingPartnership designed and built approximately 300 of its properties in violationof the accessibility requirements of the Fair Housing Act and Americans withDisabilities Act.  The suit seeks actualand punitive damages, injunctive relief (including modification ofnon-compliant properties), costs and attorneys’ fees.  The 

19

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Operating Partnership believes it has a number of viable defenses,including that a majority of the named properties were completed before theoperative dates of the statutes in question and/or were not designed or builtby the Operating Partnership. Accordingly, the Operating Partnership is defending the suitvigorously.  Due to the pendency of theOperating Partnership’s defenses and the uncertainty of many other criticalfactual and legal issues, it is not possible to determine or predict theoutcome of the suit and as a result, no amounts have been accrued at June 30,2007.  While no assurances can be given,the Operating Partnership does not believe that the suit, if adverselydetermined, will have a material adverse effect on the Operating Partnership.

The Operating Partnership does not believe there is anyother litigation pending or threatened against it that, individually or in theaggregate, reasonably may be expected to have a material adverse effect on theOperating Partnership.

Duringthe years ended December 31, 2005 and 2004, the Operating Partnershipestablished a reserve and recorded a corresponding expense, net of insurancereceivables, for estimated uninsured property damage at certain of itsproperties caused by various hurricanes in each respective year.  During the six months ended June 30, 2007,the Operating Partnership received$3.8 million in insurance proceeds and recorded an additional $2.8 million ofreceivables in anticipation of proceeds expected.  As of June 30, 2007, a receivable of $4.1million and a liability of $1.7 million are included in other assets and otherliabilities, respectively, on the consolidated balance sheets.

**As of**June 30, 2007, the Operating Partnership has nine projects totaling 3,026 unitsin various stages of development with estimated completion dates rangingthrough September 30, 2009.  Some of theprojects are developed solely by the Operating Partnership, while others areco-developed with various third party development partners.  The development venture agreements withpartners are primarily deal-specific, with differing terms regardingprofit-sharing, equity contributions, returns on investment, buy-sellagreements and other customary provisions. The partner is most often the “general” or “managing” partner of thedevelopment venture.  The typicalbuy-sell arrangements contain appraisal rights and provisions that provide theright, but not the obligation, for the Operating Partnership to acquire thepartner’s interest in the project at fair market value upon the expiration of anegotiated time period (typically two to five years after substantialcompletion of the project).  However, thebuy-sell provisions with one partner covering three projects does require theOperating Partnership to purchase the partner’s interest in the projects atfair market value five years following the receipt of the final certificate ofoccupancy on the last developed property.

**15.****                              Reportable Segments**

Operating segments are definedas components of an enterprise about which separate financial information isavailable that is evaluated regularly by senior management.  Senior management decides how resources areallocated and assesses performance on a monthly basis.

The Operating Partnership’s primary business is owning, managing, and operating multifamilyresidential properties, which includes the generation of rental and otherrelated income through the leasing of apartment units to residents.  Senior management evaluates the performanceof each of our apartment communities individually and geographically, and bothon a same store and non-same store basis; however, each of our apartmentcommunities generally has similar economic characteristics, residents, andproducts and services.  The OperatingPartnership’s operating segments havebeen aggregated by geography in a manner identical to that which is provided toits chief operating decision maker.

The Operating Partnership’s fee and asset management, development (including FIN No. 46 partiallyowned properties), condominium conversion and corporate housing (EquityCorporate Housing or “ECH”) activities are immaterial and do not individuallymeet the threshold requirements of a reportable segment as provided for in SFASNo. 131 and as such, have been aggregated in the tables presented below.

20

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All revenues are from externalcustomers and there is no customer who contributed 10% or more of the Operating Partnership’s total revenues during the six months and quarters ended June 30, 2007and 2006, respectively.

Theprimary financial measure for the OperatingPartnership’s rental real estatesegment is net operating income (“NOI”), which represents rental income less:1) property and maintenance expense; 2) real estate taxes and insuranceexpense; and 3) property management expense (all as reflected in theaccompanying consolidated statements of operations).  The Operating Partnership believes that NOI is helpful to investors asa supplemental measure of the operating performance of a real estate companybecause it is a direct measure of the actual operating results of the OperatingPartnership’s apartmentcommunities.  Current year NOI iscompared to prior year NOI and current year budgeted NOI as a measure offinancial performance.  The followingtables present NOI for each segment from our rental real estate specific tocontinuing operations for the six months ended June 30, 2007 and 2006,respectively, as well as total assets at June 30, 2007 (amounts in thousands):

 
| ** **                          | ** ** | **Six Months Ended June 30, 2007** | ** ** |
|-------------------------------------|------------|-------------------------------------------------------------|------------|
| ** **                          | ** ** | **Northeast**                                               | ** ** | **South** | ** ** | **West** | ** ** | **Other (3)** | ** ** | **Total** | ** ** |
| Rental income:                      |       |                                                        |       |   |   |   |   |   |   |   |   |
|  Same store  (1)               |       | $                                                           | 243,899    |   | $ | 304,362 |   | $ | 321,737 |   | $ | — |   | $ | 869,998 |   |
|  Non-same  store/other (2) (3) |       | 34,065                                                      |       | 50,201 |   | 36,092 |   | 47,312 |   | 167,670 |   |
| Total rental  income                |       | 277,964                                                     |       | 354,563 |   | 357,829 |   | 47,312 |   | 1,037,668 |   |
|                                |       |                                                        |       |   |   |   |   |   |   |   |   |
| Operating  expenses:                |       |                                                        |       |   |   |   |   |   |   |   |   |
|  Same store  (1)               |       | 93,531                                                      |       | 124,595 |   | 111,370 |   | — |   | 329,496 |   |
|  Non-same  store/other (2) (3) |       | 15,869                                                      |       | 20,695 |   | 14,505 |   | 52,507 |   | 103,576 |   |
| Total operating  expenses           |       | 109,400                                                     |       | 145,290 |   | 125,875 |   | 52,507 |   | 433,072 |   |
|                                |       |                                                        |       |   |   |   |   |   |   |   |   |
| NOI:                                |       |                                                        |       |   |   |   |   |   |   |   |   |
|  Same store  (1)               |       | 150,368                                                     |       | 179,767 |   | 210,367 |   | — |   | 540,502 |   |
|  Non-same  store/other (2) (3) |       | 18,196                                                      |       | 29,506 |   | 21,587 |   | (5,195 | ) | 64,094 |   |
| Total NOI                           |       | $                                                           | 168,564    |   | $ | 209,273 |   | $ | 231,954 |   | $ | (5,195 | ) | $ | 604,596 |   |
|                                |       |                                                        |       |   |   |   |   |   |   |   |   |
| Total assets                        |       | $                                                           | 4,482,793  |   | $ | 4,562,317 |   | $ | 4,867,696 |   | $ | 1,755,858 |   | $ | 15,668,664 |   |

 

----

| (1) | Properties owned  for all of both periods ending June 30, 2007 and June 30, 2006 which represented  127,396 units.                                                                                                                                       |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | Properties  acquired after January 1, 2006.                                                                                                                                                                                                              |
| (3) | Other includes  ECH, development, condominium conversion overhead of $2.4 million and other  corporate operations. Also reflects the $8.6 million elimination of rental  income recorded in Northeast, South and West operating segments related to ECH. |

 

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| ** **                    | ** ** | **Six Months Ended June 30, 2006** | ** ** |
|-------------------------------|------------|-------------------------------------------------------------|------------|
| ** **                    | ** ** | **Northeast**                                               | ** ** | **South** | ** ** | **West** | ** ** | **Other (3)** | ** ** | **Total** | ** ** |
| Rental income:                |       |                                                        |       |   |   |   |   |   |   |   |   |
| Same store (1)                |       | $                                                           | 233,466    |   | $ | 292,341 |   | $ | 304,477 |   | $ | — |   | $ | 830,284 |   |
| Non-same  store/other (2) (3) |       | 19,757                                                      |       | 11,205 |   | 9,273 |   | 39,723 |   | 79,958 |   |
| Total rental income           |       | 253,223                                                     |       | 303,546 |   | 313,750 |   | 39,723 |   | 910,242 |   |
|                          |       |                                                        |       |   |   |   |   |   |   |   |   |
| Operating expenses:           |       |                                                        |       |   |   |   |   |   |   |   |   |
| Same store (1)                |       | 89,561                                                      |       | 119,891 |   | 107,835 |   | — |   | 317,287 |   |
| Non-same  store/other (2) (3) |       | 8,844                                                       |       | 4,726 |   | 4,165 |   | 39,196 |   | 56,931 |   |
| Total operating  expenses     |       | 98,405                                                      |       | 124,617 |   | 112,000 |   | 39,196 |   | 374,218 |   |
|                          |       |                                                        |       |   |   |   |   |   |   |   |   |
| NOI:                          |       |                                                        |       |   |   |   |   |   |   |   |   |
| Same store (1)                |       | 143,905                                                     |       | 172,450 |   | 196,642 |   | — |   | 512,997 |   |
| Non-same  store/other (2) (3) |       | 10,913                                                      |       | 6,479 |   | 5,108 |   | 527 |   | 23,027 |   |
| Total NOI                     |       | $                                                           | 154,818    |   | $ | 178,929 |   | $ | 201,750 |   | $ | 527 |   | $ | 536,024 |   |

----

| (1) | Properties owned for all of both periods ending June  30, 2007 and June 30, 2006 which represented 127,396 units.                                                                                                                                                                                                             |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | Properties acquired after January 1, 2006.                                                                                                                                                                                                                                                                                    |
| (3) | Other includes ECH, condominium conversion overhead  of $2.9 million, hurricane related property damage net of reimbursement from  insurance companies and other corporate operations. Also reflects the $7.1  million elimination of rental income recorded in Northeast, South and West  operating segments related to ECH. |

 

The following tables present NOI for each segmentfrom our rental real estate specific to continuing operations for the quartersended June 30, 2007 and 2006, respectively (amounts in thousands):

 
| ** **                    | ** ** | **Quarter Ended June 30, 2007** | ** ** |
|-------------------------------|------------|-----------------------------------------------------|------------|
| ** **                    | ** ** | **Northeast**                                       | ** ** | **South** | ** ** | **West** | ** ** | **Other (3)** | ** ** | **Total** | ** ** |
| Rental income:                |       |                                                |       |   |   |   |   |   |   |   |   |
| Same store (1)                |       | $                                                   | 124,134    |   | $ | 157,125 |   | $ | 166,221 |   | $ | — |   | $ | 447,480 |   |
| Non-same  store/other (2) (3) |       | 23,007                                              |       | 30,573 |   | 17,040 |   | 11,210 |   | 81,830 |   |
| Total rental income           |       | 147,141                                             |       | 187,698 |   | 183,261 |   | 11,210 |   | 529,310 |   |
|                          |       |                                                |       |   |   |   |   |   |   |   |   |
| Operating expenses:           |       |                                                |       |   |   |   |   |   |   |   |   |
| Same store (1)                |       | 46,026                                              |       | 64,129 |   | 56,071 |   | — |   | 166,226 |   |
| Non-same  store/other (2) (3) |       | 10,583                                              |       | 12,546 |   | 6,713 |   | 18,328 |   | 48,170 |   |
| Total operating  expenses     |       | 56,609                                              |       | 76,675 |   | 62,784 |   | 18,328 |   | 214,396 |   |
|                          |       |                                                |       |   |   |   |   |   |   |   |   |
| NOI:                          |       |                                                |       |   |   |   |   |   |   |   |   |
| Same store (1)                |       | 78,108                                              |       | 92,996 |   | 110,150 |   | — |   | 281,254 |   |
| Non-same  store/other (2) (3) |       | 12,424                                              |       | 18,027 |   | 10,327 |   | (7,118 | ) | 33,660 |   |
| Total NOI                     |       | $                                                   | 90,532     |   | $ | 111,023 |   | $ | 120,477 |   | $ | (7,118 | ) | $ | 314,914 |   |

----

| (1) | Properties owned for all of both periods ending June  30, 2007 and June 30, 2006 which represented 130,175 units.                                                                                                                                              |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | Properties acquired after April 1, 2006.                                                                                                                                                                                                                       |
| (3) | Other includes ECH, development, condominium  conversion overhead of $1.2 million and other corporate operations.  Also reflects the $4.4 million elimination  of rental income recorded in Northeast, South and West operating segments  related to ECH. |

 

22

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| ** **                    | ** ** | **Quarter Ended June 30, 2006** | ** ** |
|-------------------------------|------------|-----------------------------------------------------|------------|
| ** **                    | ** ** | **Northeast**                                       | ** ** | **South** | ** ** | **West** | ** ** | **Other (3)** | ** ** | **Total** | ** ** |
| Rental income:                |       |                                                |       |   |   |   |   |   |   |   |   |
| Same store (1)                |       | $                                                   | 119,274    |   | $ | 151,842 |   | $ | 157,716 |   | $ | — |   | $ | 428,832 |   |
| Non-same  store/other (2) (3) |       | 15,283                                              |       | 11,403 |   | 2,816 |   | 6,879 |   | 36,381 |   |
| Total rental income           |       | 134,557                                             |       | 163,245 |   | 160,532 |   | 6,879 |   | 465,213 |   |
|                          |       |                                                |       |   |   |   |   |   |   |   |   |
| Operating expenses:           |       |                                                |       |   |   |   |   |   |   |   |   |
| Same store (1)                |       | 44,238                                              |       | 62,611 |   | 55,229 |   | — |   | 162,078 |   |
| Non-same  store/other (2) (3) |       | 7,048                                               |       | 4,910 |   | 1,278 |   | 13,718 |   | 26,954 |   |
| Total operating  expenses     |       | 51,286                                              |       | 67,521 |   | 56,507 |   | 13,718 |   | 189,032 |   |
|                          |       |                                                |       |   |   |   |   |   |   |   |   |
| NOI:                          |       |                                                |       |   |   |   |   |   |   |   |   |
| Same store (1)                |       | 75,036                                              |       | 89,231 |   | 102,487 |   | — |   | 266,754 |   |
| Non-same store/other  (2) (3) |       | 8,235                                               |       | 6,493 |   | 1,538 |   | (6,839 | ) | 9,427 |   |
| Total NOI                     |       | $                                                   | 83,271     |   | $ | 95,724 |   | $ | 104,025 |   | $ | (6,839 | ) | $ | 276,181 |   |

 
| (1) | Properties owned for all of both periods ending June  30, 2007 and June 30, 2006 which represented 130,175 units.                                                                                                                                                                                                                   |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | Properties acquired after April 1, 2006.                                                                                                                                                                                                                                                                                            |
| (3) | Other includes ECH, condominium conversion overhead  of $1.2 million, hurricane related property damage net of reimbursement from  insurance companies and other corporate operations.  Also reflects the $3.7 million elimination  of rental income recorded in Northeast, South and West operating segments  related to ECH. |

 

Note:  Markets included in the above geographicsegments are as follows:

(a)                          Northeast — New England (excl Boston),Boston, New York Metro, DC Northern Virginia, Suburban Maryland, Chicago,Milwaukee and Minneapolis/St. Paul.

(b)                         South — Charlotte, Raleigh/Durham, Atlanta,Jacksonville, Orlando, Tampa/Ft. Myers, South Florida, Nashville, Tulsa,Austin, Houston, Dallas/Ft. Worth, Albuquerque and Phoenix.

(c)                          West — Seattle/Tacoma, Portland, CentralValley, San Francisco Bay Area, Inland Empire, Los Angeles, Orange County, SanDiego and Denver.

Thefollowing table presents a reconciliation of NOI from our rental real estatespecific to continuing operations for the six months and quarters ended June 30, 2007 and 2006, respectively (amounts inthousands):

|                                          | ** ** | **Six Months Ended June 30,** | ** ** | **Quarter Ended June 30,** | ** ** |
|------------------------------------------|------------|---------------------------------------------------|------------|-------------------------------------------|------------|
| ** **                               | ** ** | **2007**                                          | ** ** | **2006**                                  | ** ** | **2007** | ** ** | **2006** | ** ** |
|                                     |       |                                              |       |                                      | ** ** | ** ** | ** ** | ** ** | ** ** |
| Rental income                            |       | $                                                 | 1,037,668  |                                      | $          | 910,242 |   | $ | 529,310 |   | $ | 465,213 |   |
| Property and  maintenance expense        |       | (273,801                                          | )          | (238,594                                  | )          | (136,682 | ) | (120,823 | ) |
| Real estate  taxes and insurance expense |       | (112,017                                          | )          | (88,963                                   | )          | (55,302 | ) | (45,132 | ) |
| Property  management expense             |       | (47,254                                           | )          | (46,661                                   | )          | (22,412 | ) | (23,077 | ) |
| Total operating  expenses                |       | (433,072                                          | )          | (374,218                                  | )          | (214,396 | ) | (189,032 | ) |
| Net operating income                     |       | $                                                 | 604,596    |                                      | $          | 536,024 |   | $ | 314,914 |   | $ | 276,181 |   |

 

**16.****                               Subsequent Events/Other**

*Subsequent Events*

Subsequent to June 30,2007 and through August 1, 2007, the Operating Partnership:

·                  Acquiredthree residential properties consisting of 830 units and two land parcels for$196.9 million;

·                  Soldsix residential properties consisting of 2,363 units for $381.5 million(excluding condominium units);

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·                  Repaid$26.9 million of mortgage loans;

·                  Repaid$50.0 million of 6.9% fixed rate public notes at maturity;

·                  Obtained$338.0 million in mortgage debt; and

·      Redeemedits $175.0 million Series D Preference Units (see Note 3).

Subsequentto June 30, 2007 and through August 3, 2007, the Company repurchased 2,739,000Common Shares at an average price of $42.12 per share for total considerationof $115.4 million, leaving $220.5 million remaining available for sharerepurchases.  Concurrently with thesetransactions, the Operating Partnership repurchased 2,739,000 OP Unitspreviously issued to EQR.

*Other*

The OperatingPartnership incurredimpairment losses of approximately $0.4 million and $1.2 million (includingdiscontinued operations) for the six months ended June 30, 2007 and 2006,respectively, as a result of the write-off of various pursuit and out-of-pocketcosts for terminated acquisition, disposition (including halted condominiumconversions) and development transactions.

The OperatingPartnership recorded areduction to general and administrative expense of approximately $1.7 millionduring the six months ended June 30, 2007 due to the successful resolution of acertain lawsuit in Florida, resulting in the reversal of the majority of apreviously established litigation reserve. The Operating Partnership had previously recorded a reduction to generaland administrative expenses of approximately $2.8 million during the six monthsended June 30, 2006 due to the recovery of insurance proceeds related to thesame lawsuit.

** **

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** **

**Item 2.    Management’s Discussionand Analysis of Financial Condition and Results of Operations**

**Overview**

Forfurther information including definitions for capitalized terms not definedherein, refer to the consolidated financial statements and footnotes theretoincluded in the Operating Partnership’sannual report on Form 10-K for the year ended December 31, 2006.

Forward-lookingstatements in this report are intended to be made pursuant to the safe harborprovisions of the Private Securities Litigation Reform Act of 1995.  These statements are based on currentexpectations, estimates, projections and assumptions made by management.  While the OperatingPartnership’s management believes the assumptions underlying itsforward-looking statements are reasonable, such information is inherentlysubject to uncertainties and may involve certain risks, which could causeactual results, performance, or achievements of the Operating Partnership to differ materially from anticipatedfuture results, performance or achievements expressed or implied by suchforward-looking statements.  Many ofthese uncertainties and risks are difficult to predict and beyond management’scontrol.  Forward-looking statements arenot guarantees of future performance, results or events.  The OperatingPartnership assumes no obligation to update or supplementforward-looking statements because of subsequent events.   Factors that might cause such differencesinclude, but are not limited to the following:

·                  We intend to actively acquire anddevelop multifamily properties for rental operations and/or conversion intocondominiums, as well as upgrade and sell existing properties as individualcondominiums.  We may underestimate thecosts necessary to bring an acquired or development property up to standardsestablished for its intended market position. Additionally, we expect that other major real estate investors withsignificant capital will compete with us for attractive investmentopportunities or may also develop properties in markets where we focus ourdevelopment efforts.  This competitionmay increase prices for multifamily properties or decrease the price at whichwe expect to sell individual properties. We may not be in a position or have the opportunity in the future tomake suitable property acquisitions on favorable terms.  We also plan to develop more propertiesourselves in addition to co-investing with our development partners for eitherthe rental or condominium market, depending on opportunities in eachsub-market.  This may increase theoverall level of risk associated with our developments.  The total number of development units, costof development and estimated completion dates are subject to uncertaintiesarising from changing economic conditions (such as the cost of labor and constructionmaterials), competition and local government regulation;

·                  Sources of capital to the Operating Partnership or labor andmaterials required for maintenance, repair, capital expenditure or developmentare more expensive than anticipated;

·                  Occupancy levels and market rents maybe adversely affected by national and local economic and market conditionsincluding, without limitation, new construction of multifamily housing, slowemployment growth, availability of low interest mortgages for single-familyhome buyers and the potential for geopolitical instability, all of which arebeyond the Operating Partnership’s control; and

·                  Additionalfactors as discussed in Part I of the Annual Report on Form 10-K, particularlythose under “Risk Factors”.

Readersare cautioned not to place undue reliance on these forward-looking statements,which speak only as of the date hereof. The Operating Partnershipundertakes no obligation to publicly release any revisions to theseforward-looking statements, which may be made to reflect events orcircumstances after the date hereof or to reflect the occurrence ofunanticipated events.  Forward-lookingstatements and related uncertainties are also included in Notes 5 and 11 to theNotes to Consolidated Financial Statements in this report.

25

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**Results of Operations**

Inconjunction with our business objectives and operating strategy, the Operating Partnership has continued to invest or recycle its capital investment in apartmentcommunities located in strategically targeted markets during the six months ended June30, 2007.  In summary, we:

·                  Acquired $1.2 billion of properties consisting of 28 properties and 6,209units and $65.5 million of land parcels, all of which we deem to be in ourstrategic targeted markets; and

·                  Sold $790.6 million of properties consisting of 37 properties and 10,018units, $40.7 million of land parcels and 383 condominium units for $103.1million.

The Operating Partnership’s primary financial measure for evaluatingeach of its apartment communities is net operating income (“NOI”).  NOI represents rental income less propertyand maintenance expense, real estate tax and insurance expense, and propertymanagement expense.  The Operating Partnership believes that NOI is helpful to investors asa supplemental measure of the operating performance of a real estate companybecause it is a direct measure of the actual operating results of the Operating Partnership’s apartment communities.

Properties that the Operating Partnership owned for all of both of the six months ended June 30, 2007 and 2006(the “Six-Month 2007 Same Store Properties”), which represented 127,396 units,and properties that the Operating Partnership owned for all of both of thequarters ended June 30, 2007 and 2006 (the “Second Quarter 2007 Same StoreProperties”), which represented 130,175 units, impacted the Operating Partnership’s results of operations.  Both the Six-Month 2007 Same Store Propertiesand the Second Quarter 2007 Same Store Properties are discussed in thefollowing paragraphs.

The Operating Partnership’s acquisition,disposition, completed development and consolidation of previouslyunconsolidated property activities also impacted overall results of operationsfor the six months and quarters ended June 30, 2007 and 2006.  The impacts of these activities are alsodiscussed in greater detail in the following paragraphs.

***Comparison of the six monthsended June 30, 2007 to the six months ended June 30, 2006***

For the six months ended June 30, 2007, income fromcontinuing operations decreased by approximately $0.6 million when compared tothe six months ended June 30, 2006.  Thedecrease in continuing operations is discussed below.

Revenues from the Six-Month 2007 Same Store Propertiesincreased $39.7 million primarily as a result of higher rental rates charged toresidents.  Expenses from the Six-Month2007 Same Store Properties increased $12.2 million primarily due to higherpayroll, building/maintenance and real estate taxes.  The following tables provide comparative samestore results and statistics for the Six-Month 2007 Same Store Properties:

**JuneYTD 2007 vs. June YTD 2006**

**YTDover YTD Same Store Results/Statistics**

**$ inThousands (except for Average Rental Rate) — 127,396 Same Store Units**

 
| ** **      | ** ** | **Results**  | ** ** | **Statistics** | ** ** |
|-----------------|------------|--------------|------------|----------------|------------|
| **Description** | ** ** | **Revenues** | ** ** | **Expenses**   | ** ** | **NOI** | ** ** | **Average  Rental  Rate (1)** | ** ** | **Occupancy** | ** ** | **Turnover** | ** ** |
|            |       |         |       |           |       |   |   |   |   |   |   |   |   |
| YTD 2007        |       | $            | 869,998    |           | $          | 329,496 |   | $ | 540,502 |   | $ | 1,202 |   | 94.8 | % | (30.0 | )% |
| YTD 2006        |       | $            | 830,284    |           | $          | 317,287 |   | $ | 512,997 |   | $ | 1,149 |   | 94.7 | % | (30.6 | )% |
| Change          |       | $            | 39,714     |           | $          | 12,209 |   | $ | 27,505 |   | $ | 53 |   | 0.1 | % | 0.6 | % |
| Change          |       | 4.8          | %          | 3.8            | %          | 5.4 | % | 4.6 | % |   |   |   |   |

 

26

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**(1)           Averagerental rate is defined as total rental revenues divided by the weighted averageoccupied units for the period.**

 

The following table presents a reconciliation ofoperating income per the consolidated statements of operations to NOI for theSix-Month 2007 Same Store Properties:

|                                  | ** ** | **Six Months Ended June 30,** | ** ** |
|----------------------------------|------------|---------------------------------------------------|------------|
| ** **                       | ** ** | **2007**                                          | ** ** | **2006** | ** ** |
| ** **                       | ** ** | **(Amounts in thousands)**              | ** ** |
| ** **                       | ** ** | ** **                                        | ** ** | ** ** | ** ** |
| Operating income                 |       | $                                                 | 278,834    |   | $ | 255,639 |   |
| Adjustments:                     |       |                                              |       |   |   |
| Non-same store operating results |       | (64,094                                           | )          | (23,027 | ) |
| Fee and asset management revenue |       | (4,703                                            | )          | (4,807 | ) |
| Fee and asset management expense |       | 4,504                                             |       | 4,326 |   |
| Depreciation                     |       | 304,052                                           |       | 257,683 |   |
| General and administrative       |       | 21,515                                            |       | 22,378 |   |
| Impairment                       |       | 394                                               |       | 805 |   |
|                             |       |                                              |       |   |   |
| Same store NOI                   |       | $                                                 | 540,502    |   | $ | 512,997 |   |

** **

**For properties that the**Operating Partnership  acquiredprior to January 1, 2006 and expects to continue to own through December 31,2007, the Operating Partnership  anticipates the following same store results for thefull year ending December 31, 2007:

| 2007 Same Store Assumptions |
|-----------------------------|
| Physical Occupancy          |   | 95.0% |   |
| Revenue Change              |   | 3.75%  to 4.25% |   |
| Expense Change              |   | 2.50%  to 3.00% |   |
| NOI Change                  |   | 4.50% to 5.25% |   |

** **

**These 2007 assumptions are basedon current expectations and are forward-looking.**

**Non-same store operating resultsincreased $41.1 million and consist primarily of properties acquired incalendar years 2007 and 2006 as well as our corporate housing business.**

**See also Note 15 in the Notes toConsolidated Financial Statements for additional discussion regarding the**Operating Partnership’s segment disclosures.

Feeand asset management revenues, net of fee and asset management expensesdecreased $0.3 million primarily as a result of lower income earned from ourmilitary housing at Ft. Lewis.  As of June 30,2007 and 2006, the OperatingPartnershipmanaged 15,086 and 14,784 units, respectively, for third parties andunconsolidated entities.

**Property management expenses fromcontinuing operations include off-site expenses associated with theself-management of the**OperatingPartnership’s properties as well as management fees paid to anythird party management companies.  Theseexpenses increased by approximately $0.6 million or 1.3%.  This increase is primarily attributable tohigher overall payroll-related costs.

Depreciationexpense from continuing operations, which includes depreciation on non-realestate assets, increased $46.4 million primarily as a result of additionaldepreciation expense on newly acquired properties and capital expenditures forall properties owned.

General and administrativeexpenses, which include corporate operating expenses, decreased $0.9 millionprimarily as a result of a decrease of $1.4 million in performance share expensesand $1.0 million in 

27

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lower state and franchise taxes, partially offset by$1.2 million less expense recovery related to a certain lawsuit in Florida (seeNote 16). The OperatingPartnership anticipates that general and administrative expenses will approximate$46.0 million to $49.0 million for the year ending December 31, 2007. The aboveassumption is based on current expectations and is forward-looking.

Impairment from continuingoperations decreased $0.4 million primarily as a result of fewer write-offs fordevelopment properties during the six months ended June 30, 2007.

**Interest and other income fromcontinuing operations increased $2.0 million primarily as a result of interestearned on 1031 exchange and earnest money deposits and other short terminvestments.  The**Operating Partnership anticipates that interestand other income will approximate $20.0 million to $25.0 million for the yearending December 31, 2007.  The aboveassumption is based on current expectations and is forward-looking.

Interestexpense from continuing operations, including amortization of deferredfinancing costs, increased approximately $31.0****million primarily as a result of higher overall debt levelsoutstanding due to the Company’s share repurchase activity as well as thetiming of acquisitions and dispositions, partially offset by lower overalleffective interest rates.  During the sixmonths ended June 30, 2007, the Operating Partnership capitalized interest costs related to development activityof approximately $17.9 million as compared to $7.8 million for the six monthsended June 30, 2006. The effective interest cost on all indebtedness for the six months endedJune 30, 2007 was 6.02% as comparedto 6.19% for the six months ended June 30, 2006.  The Operating Partnership anticipates thatinterest expense (including discontinued operations) will approximate $495.0million to $510.0 million for the year ending December 31, 2007. The aboveassumption is based on current expectations and is forward-looking.

Loss from investments in unconsolidated entities wasconsistent between the periods under comparison.

Net gain on sales of unconsolidated entities decreased$0.4 million between the periods under comparison as the Operating Partnership recognized a gain ontwo unconsolidated properties sold in 2006 as compared to no sales in 2007.

Net gain on sales of land parcels increased $4.3million primarily as a result of the sale of one vacant land parcel during thesix months ended June 30, 2007.

Discontinued operations, netdecreased approximately $140.9 million between the periods undercomparison.  This decrease is primarilydue to the mix of properties sold during the six months ended June 30, 2007 as compared to the six months ended June 30, 2006.  See Note 13 in the Notesto Consolidated Financial Statements for further discussion.

***Comparisonof the quarter ended June 30, 2007 to the quarter ended June 30, 2006***

Forthe quarter ended June 30, 2007, income from continuing operationsincreased by approximately $0.2 million when compared to the quarter ended June30, 2006. The increase in continuing operations is discussed below.

**Revenuesfrom the Second Quarter 2007 Same Store Properties increased $18.6 millionprimarily as a result of higher rental rates charged to residents.  Expenses from the Second Quarter 2007 SameStore Properties increased $4.1 million primarily due to higher payroll,utilities and real estate taxes.  Thefollowing tables provide comparative same store results and statistics for theSecond Quarter 2007 Same Store Properties:**

** **

28

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**SecondQuarter 2007 vs. Second Quarter 2006**

**Quarterover Quarter Same Store Results/Statistics**

**$ in Thousands (except for AverageRental Rate) — 130,175 Same Store Units**
| ** **      | ** ** | **Results**  | ** ** | **Statistics** | ** ** |
|-----------------|------------|--------------|------------|----------------|------------|
| **Description** | ** ** | **Revenues** | ** ** | **Expenses**   | ** ** | **NOI** | ** ** | **Average  Rental  Rate (1)** | ** ** | **Occupancy** | ** ** | **Turnover** | ** ** |
| Q2 2007         |       | $            | 447,480    |           | $          | 166,226 |   | $ | 281,254 |   | $ | 1,210 |   | 94.8 | % | (16.5 | %) |
| Q2 2006         |       | $            | 428,832    |           | $          | 162,078 |   | $ | 266,754 |   | $ | 1,162 |   | 94.7 | % | (16.6 | %) |
| Change          |       | $            | 18,648     |           | $          | 4,148 |   | $ | 14,500 |   | $ | 48 |   | 0.1 | % | 0.1 | % |
| Change          |       | 4.3          | %          | 2.6            | %          | 5.4 | % | 4.1 | % |   |   |   |   |

----

(1)             Averagerental rate is defined as total rental revenues divided by the weighted averageoccupied units for the period.

The following table presents a reconciliation ofoperating income per the consolidated statements of operations to NOI for theSecond Quarter 2007 Same Store Properties:

|                                   | ** ** | **Quarter Ended June 30,** | ** ** |
|-----------------------------------|------------|-------------------------------------------|------------|
| ** **                        | ** ** | **2007**                                  | ** ** | **2006** | ** ** |
| ** **                        | ** ** | **(Amounts in thousands)**      | ** ** |
|                              |       |                                      |       |   |   |
| Operating income                  |       | $                                         | 148,448    |   | $ | 133,995 |   |
| Adjustments:                      |       |                                      |       |   |   |
| Non-same store  operating results |       | (33,660                                   | )          | (9,427 | ) |
| Fee and asset  management revenue |       | (2,436                                    | )          | (2,320 | ) |
| Fee and asset  management expense |       | 2,163                                     |       | 2,158 |   |
| Depreciation                      |       | 155,032                                   |       | 132,771 |   |
| General and  administrative       |       | 11,549                                    |       | 9,338 |   |
| Impairment                        |       | 158                                       |       | 239 |   |
| Same store NOI                    |       | $                                         | 281,254    |   | $ | 266,754 |   |

** **

Non-same store operating results increased $24.2million and consist primarily of properties acquired in calendar years 2007 and2006 as well as our corporate housing business.

See also Note 15 in the Notes to ConsolidatedFinancial Statements for additional discussion regarding the OperatingPartnership’s segment disclosures.

Fee and asset managementrevenues, net of fee and asset management expenses, was consistent between theperiods under comparison.

Property management expenses from continuingoperations include off-site expenses associated with the self-management of theOperating Partnership’s properties as well as management fees paid to any thirdparty management companies.  Theseexpenses decreased by approximately $0.7 million or 2.9%.  This decrease is primarily attributable tothe expiration of third party management contracts and lower marketing/trainingcosts, partially offset by higher overall payroll-related costs.

Depreciation expense fromcontinuing operations, which includes depreciation on non-real estate assets,increased $22.3 million primarily as a result of additional depreciationexpense on newly acquired properties and capital expenditures for allproperties owned.

General and administrative expenses, which includecorporate operating expenses, increased $2.2 million primarily as a result of a$2.8 million reimbursement of prior year legal defense costs related to a

29

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certain lawsuit inFlorida (See Note 16).

Impairment from continuing operations decreased$81,000 primarily as a result of fewer write-offs for development propertiesduring the quarter ended June 30, 2007.

Interestand other income from continuing operations increased $1.9 million primarily asa result of interest earned on 1031 exchange and earnest money deposits andother short term investments.

Interestexpense from continuing operations, including amortization of deferredfinancing costs, increased approximately $20.8****million primarily as a result of higher overall debt levelsoutstanding due to the Company’s share repurchase activity as well as thetiming of acquisitions and dispositions, partially offset by lower overalleffective interest rates.  During thequarter ended June 30, 2007, the Operating Partnership capitalized interest costs related to developmentactivity of approximately $10.0 million as compared to $3.8 million for thequarter ended June 30, 2006. The effective interest cost on all indebtedness for the quarter ended June30, 2007 was 6.10% as compared to 6.14% forthe quarter ended June 30, 2006.

Loss from investments in unconsolidated entities wasconsistent between the periods under comparison.

Net gain on sales of unconsolidated entities wasconsistent between the periods under comparison.

Net gain on sales of land parcels increased $4.3million primarily as a result of the sale of one vacant land parcel during thequarter ended June 30, 2007.

Discontinued operations, netincreased approximately $129.5 million between the periods undercomparison.  This increase is primarilydue to an increase in the number of properties sold and the mix of thoseproperties sold during the quarter ended June 30, 2007 as compared tothe quarter ended June 30, 2006. See Note 13 in the Notes to Consolidated Financial Statements forfurther discussion.

**Liquidity and Capital Resources**

As of January 1, 2007,the Operating Partnership hadapproximately $260.3 million of cash and cash equivalents and $470.7 millionavailable under its revolving credit facilities (net of $69.3 million which wasrestricted/dedicated to support letters of credit and not available forborrowing).  After taking into effect thevarious transactions discussed in the following paragraphs and the net cashprovided by operating activities, the OperatingPartnership’s cash and cash equivalents balance at June 30, 2007 was approximately $66.3million and the amount available on the OperatingPartnership’s revolving credit facilities was $649.4 million (net of$70.6 million which was restricted/dedicated to support letters of credit andnot available for borrowing).  EffectiveFebruary 28, 2007, the OperatingPartnership increased its capacity on its revolving credit facility to$1.5 billion.  See Note 10 for furtherdiscussion.

During the six months ended June 30, 2007, the Operating Partnership generated proceedsfrom various transactions, which included the following:

·                  Disposed of 41 properties, variousindividual condominium units and one land parcel, receiving net proceeds ofapproximately $839.1 million;

·                  Obtained $346.1 million in netproceeds from the issuance of $350.0 million of five year 5.50% fixed ratepublic notes;

·                  Obtained $640.6 million in netproceeds from the issuance of $650.0 million of ten year 5.75% fixed ratepublic notes and terminated five forward starting swaps designated to hedge thenote issuance, receiving net proceeds of $2.4 million;

·                  Obtained $262.0 million in newmortgage financing; and

·                  Issued approximately 0.4 million OPUnits and received net proceeds of $14.3 million.

30

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Duringthe six months ended June30, 2007, the above proceeds were primarily utilized to:

 

·                  Invest $195.4million primarily in development projects;

·                  Acquire 28properties and five land parcels, utilizing cash of $1.1 billion;

·      Repurchase18.5 million OP Units, utilizing cash of $837.3 million (see Note 3);

·                  Repay $322.6million of mortgage loans; and

·                  Repay$50.0 million of fixed rate public notes.

Depending on its analysis of market prices, economicconditions, and other opportunities for the investment of available capital,the Company may repurchase its Common Shares pursuant to its existing sharebuyback program authorized by the Board of Trustees.  On April 27, 2007, the Board of Trusteesapproved an increase of $200.1 million to the Company’s authorized sharerepurchase program.  On May 24, 2007, theBoard of Trustees approved an additional $500.0 million share repurchaseprogram.  As of June 30, 2007 and aftergiving effect to the above increases, the Company had $335.8 million remainingavailable for share repurchases.  EQRrepurchased $866.0 million (18,460,206 shares at an average price per share of$46.91) of its Common Shares during the six months ended June 30, 2007.  Concurrent with these transactions, theOperating Partnership repurchased and retired 18,460,206 OP Units previouslyissued to EQR.  See Notes 3 and 16 forfurther discussion.

The Operating Partnership’s total debt summary anddebt maturity schedules as of June 30, 2007, are as follows:

**DebtSummary as of June 30, 2007**

(Amounts in thousands)
| ** **                                 | ** ** | **Amounts (1)** | ** ** | **% of Total** | ** ** | **Weighted  Average  Rates (1)** | ** ** | **Weighted  Average  Maturities  (years)** | ** ** |
|--------------------------------------------|------------|----------------------|------------|--------------------------|------------|---------------------------------------|------------|--------------------------------------------|------------|
| Secured                                    |       | $                    | 3,188,395  |                     | 34.2       | %                                     | 5.73       | %                                          | 7.4        |   |
| Unsecured                                  |       | 6,143,139            |       | 65.8                     | %          | 5.65                                  | %          | 6.7                                        |       |
| Total                                      |       | $                    | 9,331,534  |                     | 100.0      | %                                     | 5.68       | %                                          | 6.9        |   |
|                                       |       |                 |       |                     |       |                                  |       |                                       |       |
| Fixed Rate Debt:                           |       |                 |       |                     |       |                                  |       |                                       |       |
| Secured — Conventional                |       | $                    | 2,135,082  |                     | 22.9       | %                                     | 6.13       | %                                          | 4.2        |   |
| Unsecured — Public/Private            |       | 5,106,127            |       | 54.7                     | %          | 5.64                                  | %          | 6.8                                        |       |
| Unsecured — Tax Exempt                |       | 111,390              |       | 1.2                      | %          | 5.06                                  | %          | 21.8                                       |       |
| Fixed Rate Debt                            |       | 7,352,599            |       | 78.8                     | %          | 5.79                                  | %          | 6.3                                        |       |
|                                       |       |                 |       |                     |       |                                  |       |                                       |       |
| Floating Rate  Debt:                       |       |                 |       |                     |       |                                  |       |                                       |       |
| Secured — Conventional                |       | 435,516              |       | 4.7                      | %          | 7.13                                  | %          | 6.0                                        |       |
| Secured — Tax Exempt                  |       | 617,797              |       | 6.6                      | %          | 3.20                                  | %          | 20.2                                       |       |
| Unsecured — Public                    |       | 145,622              |       | 1.5                      | %          | 6.60                                  | %          | 1.9                                        |       |
| Unsecured — Revolving Credit Facility |       | 780,000              |       | 8.4                      | %          | 5.65                                  | %          | 4.7                                        |       |
| Floating Rate Debt                         |       | 1,978,935            |       | 21.2                     | %          | 5.33                                  | %          | 9.4                                        |       |
| Total                                      |       | $                    | 9,331,534  |                     | 100.0      | %                                     | 5.68       | %                                          | 6.9        |   |

----

(1)             Netof the effect of any derivative instruments. Weighted average rates are for the six months ended June 30, 2007.

Note:  The Operating Partnership capitalizedinterest of approximately $17.9 million and $7.8 million for the six monthsended June 30, 2007 and 2006, respectively. The Operating Partnership capitalized interest of approximately $10.0million and $3.8 million for the quarters ended June 30, 2007 and 2006,respectively.

31

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**Debt Maturity Schedule as of June30, 2007**

**(Amounts in thousands)**
| **Year** | ** ** | **Fixed  Rate (1)** | ** ** | **Floating  Rate (1)** | ** ** | **Total** | ** ** | **% of Total** | ** ** | **Weighted  Average Rates  on Fixed Rate  Debt (1)** | ** ** | **Weighted  Average Rates  on Total  Debt (1)** | ** ** |
|----------|------------|--------------------------|------------|-----------------------------|------------|-----------|------------|--------------------------|------------|--------------------------------------------------------------------------|------------|----------------------------------------------------------------|------------|
| 2007     |       | $                        | 156,908    |                        | $          | 40,946    |       | $                        | 197,854    |                                                                     | 2.1        | %                                                              | 6.11       | % | 6.30 | % |
| 2008     |       | 470,272                  |       | 136,471                     |       | 606,743   |       | 6.5                      | %          | 6.65                                                                     | %          | 6.56                                                           | %          |
| 2009     |       | 457,504                  |       | 386,711                     |       | 844,215   |       | 9.0                      | %          | 6.35                                                                     | %          | 5.37                                                           | %          |
| 2010     |       | 279,484                  |       | 1,654                       |       | 281,138   |       | 3.0                      | %          | 7.05                                                                     | %          | 7.05                                                           | %          |
| 2011 (2) |       | 1,475,336                |       | 24,150                      |       | 1,499,486 |       | 16.1                     | %          | 5.55                                                                     | %          | 5.52                                                           | %          |
| 2012 (3) |       | 890,335                  |       | 780,000                     |       | 1,670,335 |       | 17.9                     | %          | 6.09                                                                     | %          | 5.87                                                           | %          |
| 2013     |       | 565,655                  |       | —                      |       | 565,655   |       | 6.1                      | %          | 5.93                                                                     | %          | 5.93                                                           | %          |
| 2014     |       | 504,708                  |       | —                      |       | 504,708   |       | 5.4                      | %          | 5.27                                                                     | %          | 5.27                                                           | %          |
| 2015     |       | 355,491                  |       | —                      |       | 355,491   |       | 3.8                      | %          | 6.41                                                                     | %          | 6.41                                                           | %          |
| 2016     |       | 1,089,241                |       | —                      |       | 1,089,241 |       | 11.7                     | %          | 5.32                                                                     | %          | 5.32                                                           | %          |
| 2017+    |       | 1,107,665                |       | 609,003                     |       | 1,716,668 |       | 18.4                     | %          | 6.14                                                                     | %          | 5.66                                                           | %          |
| Total    |       | $                        | 7,352,599  |                        | $          | 1,978,935 |       | $                        | 9,331,534  |                                                                     | 100.0      | %                                                              | 5.91       | % | 5.75 | % |

----

(1)             Netof the effect of any derivative instruments. Weighted average rates are as of June 30, 2007.

(2)             Includes$650.0 million of 3.85% convertible unsecured debt with a final maturity of2026.  The notes are callable by theOperating Partnership on or after August 18, 2011.  The notes are putable by the holders onAugust 18, 2011, August 15, 2016 and August 15, 2021.

(3)             Includes$780.0 million outstanding on the Operating Partnership’s $1.5 billion unsecuredrevolving credit facility, which matures on February 28, 2012.

The following table provides a summary of theOperating Partnership’s unsecured debt as of June 30, 2007:

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**UnsecuredDebt Summary as of June 30, 2007**

(Amounts in thousands)

 
| ** **                       | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **Unamortized** | ** ** | ** **  | ** ** |
|----------------------------------|------------|------------|------------|------------|------------|------------|------------|-----------------|------------|-------------|------------|
| ** **                       | ** ** | **Coupon** | ** ** | **Due**    | ** ** | **Face**   | ** ** | **Premium/**    | ** ** | **Net**     | ** ** |
| ** **                       | ** ** | **Rate**   | ** ** | **Date**   | ** ** | **Amount** | ** ** | **(Discount)**  | ** ** | **Balance** | ** ** |
|                             |       |       |       |       |       |       |       |            |       |        |       |
| **Fixed Rate Notes:**            | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** **      | ** ** | ** **  | ** ** |
|                             |       | 6.900      | %          | 08/01/07   |       | $          | 50,000     |            | $          | (2          | )          | $ | 49,998 |   |
|                             |       | 7.540      | %          | 09/01/07   | (1)        | 4,286      |       | —          |       | 4,286       |       |
|                             |       | 4.861      | %          | 11/30/07   |       | 50,000     |       | —          |       | 50,000      |       |
|                             |       | 7.500      | %          | 08/15/08   | (1)        | 130,000    |       | —          |       | 130,000     |       |
|                             |       | 4.750      | %          | 06/15/09   | (2)        | 300,000    |       | (537            | )          | 299,463     |       |
|                             |       | 6.950      | %          | 03/02/11   |       | 300,000    |       | 3,254           |       | 303,254     |       |
|                             |       | 6.625      | %          | 03/15/12   |       | 400,000    |       | (1,382          | )          | 398,618     |       |
|                             |       | 5.500      | %          | 10/01/12   |       | 350,000    |       | (1,812          | )          | 348,188     |       |
|                             |       | 5.200      | %          | 04/01/13   |       | 400,000    |       | (681            | )          | 399,319     |       |
|                             |       | 5.250      | %          | 09/15/14   |       | 500,000    |       | (443            | )          | 499,557     |       |
|                             |       | 6.584      | %          | 04/13/15   |       | 300,000    |       | (865            | )          | 299,135     |       |
|                             |       | 5.125      | %          | 03/15/16   |       | 500,000    |       | (466            | )          | 499,534     |       |
|                             |       | 5.375      | %          | 08/01/16   |       | 400,000    |       | (1,685          | )          | 398,315     |       |
|                             |       | 5.750      | %          | 06/15/17   |       | 650,000    |       | (5,086          | )          | 644,914     |       |
|                             |       | 7.125      | %          | 10/15/17   |       | 150,000    |       | (668            | )          | 149,332     |       |
|                             |       | 7.570      | %          | 08/15/26   |       | 140,000    |       | —          |       | 140,000     |       |
|                             |       | 3.850      | %          | 08/15/26   | (3)        | 650,000    |       | (7,786          | )          | 642,214     |       |
| Floating Rate  Adjustments       |       |       |       |       | (2)        | (150,000   | )          | —          |       | (150,000    | )          |
|                             |       |       |       |       |       | 5,124,286  |       | (18,159         | )          | 5,106,127   |       |
| **Fixed Rate Tax Exempt Notes:** |       |       |       |       |       |       |       |            |       |        |       |
|                             |       | 4.750      | %          | 12/15/28   | (1)        | 35,600     |       | —          |       | 35,600      |       |
|                             |       | 5.200      | %          | 06/15/29   | (1)        | 75,790     |       | —          |       | 75,790      |       |
|                             |       |       |       |       |       | 111,390    |       | —          |       | 111,390     |       |
|                             |       |       |       |       |       |       |       |            |       |        |       |
| **Floating Rate Notes:**         |       |       |       |       |       |       |       |            |       |        |       |
| ** **                       |       |       |       | 06/15/09   | (2)        | 150,000    |       | —          |       | 150,000     |       |
| FAS 133 Adjustments -  net       |       |       |       |       | (2)        | (4,378     | )          | —          |       | (4,378      | )          |
|                             |       |       |       |       |       | 145,622    |       | —          |       | 145,622     |       |
|                             |       |       |       |       |       |       |       |            |       |        |       |
| **Revolving Credit Facility:**   |       |       |       | 02/28/12   | (4)        | 780,000    |       | —          |       | 780,000     |       |
| **Total Unsecured Debt**         |       |       |       |       |       | $          | 6,161,298  |            | $          | (18,159     | )          | $ | 6,143,139 |   |

----

(1)             Notes areprivate.  All other unsecured debt ispublic.

(2)             $150.0 million infair value interest rate swaps converts 50% of the 4.750% Notes due June 15,2009 to a floating interest rate.

(3)             Convertible notesmature on August 15, 2026.  The notes arecallable by the Operating Partnership on or after August 18, 2011. The notesare putable by the holders on August 18, 2011, August 15, 2016 and August 15,2021.

(4)             Representsamount outstanding on the Operating Partnership’s $1.5 billion unsecuredrevolving credit facility which matures on February 28, 2012.

As of August 1, 2007, an unlimited amount of debtsecurities remains available for issuance by the Operating Partnership under aregistration statement that became automatically effective upon filing with theSEC in June 2006 (under SEC regulations enacted in 2005, the registrationstatement automatically expires 

33

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on June 29, 2009 and doesnot contain a maximum issuance amount) and $956.5 million in equity securitiesremains available for issuance by EQR under a registration statement the SECdeclared effective in February 1998. Per the terms of ERPOP’s partnershipagreement, EQR contributes the net proceeds of all equity offerings to thecapital of the Operating Partnership in exchange for additional OP Units (on aone-for-one Common Share per OP Unit basis) or preference units (on aone-for-one preferred share per preference unit basis).

The Operating Partnership’s “ConsolidatedDebt-to-Total Market Capitalization Ratio” as of June 30, 2007 is presented in thefollowing table.  The OperatingPartnership calculates the equity component of its market capitalization as thesum of (i) the total outstanding OP Units at the equivalent market value of theclosing price of EQR’s Common Shares on the New York Stock Exchange; (ii) the “OPUnit Equivalent” of all convertible preference units; and (iii) the liquidationvalue of all perpetual preference units outstanding.

**CapitalStructure as of June 30, 2007**

**(Amounts in thousands except for unit and per unitamounts)**
| Secured Debt                                 | ** ** | ** **  | ** ** | $              | 3,188,395      |      | 34.2      | %          |       |       |
|----------------------------------------------|------------|-------------|------------|----------------|----------------|-----------|-----------|------------|------------|------------|
| Unsecured Debt                               | ** ** | ** **  | ** ** | 5,363,139      |           | 57.5      | %         | ** ** | ** ** |
| Revolving Credit Facility                    |       |        |       | 780,000        |           | 8.3       | %         |       |       |
| **Total  Debt**                              | ** ** | ** **  | ** ** | **9,331,534**  |           | **100.0** | **%**     | **40.1**   | **%**      |
|                                         |       |        |       |           |           |      |      |       |       |
| OP Units                                     | ** ** | 296,174,990 |       |           |           |      |      |       |       |
| OP Unit Equivalents  (see below)             | ** ** | 491,520     |       |           |           |      |      |       |       |
| Total  outstanding at quarter-end            | ** ** | 296,666,510 |       |           |           |      |      |       |       |
| EQR Common Share  Price at June 30, 2007     | ** ** | $           | 45.63      |           |           |      |      |       |       |       |
|                                         | ** ** | ** **  | ** ** | 13,536,893     |           | 97.3      | %         | ** ** | ** ** |
| Perpetual  Preference Units (see below) | ** ** | ** **  | ** ** | 375,000        |           | 2.7       | %         | ** ** | ** ** |
| **Total  Equity**                            | ** ** | ** **  | ** ** | **13,911,893** |           | **100.0** | **%**     | **59.9**   | **%**      |
|                                         |       |        |       |           |           |      |      |       |       |
| **Total Market Capitalization**              | ** ** | ** **  | ** ** | **$**          | **23,243,427** |      | **100.0** | **%**      | ** ** | ** ** |
|                                              |            |             |            |                |                |           |           |            |            |            |  |

 

**Convertible Preference Units as of June 30, 2007**

**(Amounts in thousands except forunit and per unit amounts)**
| **Series**                          | ** ** | **Redemption  Date** | ** ** | **Outstanding  Units** | ** ** | **Liquidation  Value** | ** ** | **Annual  Dividend Per  Unit** | ** ** | **Annual  Dividend  Amount** | ** ** | **Weighted  Average  Rate** | ** ** | **Conversion  Ratio** | ** ** | **OP Unit  Equivalents** | ** ** |
|-------------------------------------|------------|----------------------|------------|------------------------|------------|------------------------|------------|-------------------------------------|------------|------------------------------|------------|-----------------------------|------------|-----------------------|------------|-------------------------------|------------|
| Preference Units:                   |       |                 |       |                   |       |                   |       |                                |       |                         |       |                        |       |                  |       |                          |       |
| 7.00% Series E                      |       | 11/1/98              |       | 401,716                |       | $                      | 10,043     |                                | $          | 1.75                         |       | $                           | 703        |                  |       |                          | 1.1128     |   | 447,030 |   |
| 7.00% Series H                      |       | 6/30/98              |       | 25,534                 |       | 638                    |       | 1.75                                |       | 45                           |       |                        |       | 1.4480                |       | 36,973                        |       |
| Junior Preference  Units:           |       |                 |       |                   |       |                   |       |                                |       |                         |       |                        |       |                  |       |                          |       |
| 8.00% Series B                      |       | 7/29/09              |       | 7,367                  |       | 184                    |       | 2.00                                |       | 15                           |       |                        |       | 1.020408              |       | 7,517                         |       |
| Total Convertible  Preference Units |       |                 |       | 434,617                |       | $                      | 10,865     |                                |       |                         | $          | 763                         |       | 7.02                  | %          |                          |       | 491,520 |   |
|                                     |            |                      |            |                        |            |                        |            |                                     |            |                              |            |                             |            |                       |            |                               |            |  |  |  |

 

**Perpetual Preference Units as of June 30, 2007**

**(Amounts in thousands except forunit and per unit amounts)**
| **Series**                        | ** ** | **Redemption  Date** | ** ** | **Outstanding  Units** | ** ** | **Liquidation  Value** | ** ** | **Annual  Dividend  Per Unit** | ** ** | **Annual  Dividend  Amount** | ** ** | **Weighted**

**Average  Rate** | ** ** |
|-----------------------------------|------------|----------------------|------------|------------------------|------------|------------------------|------------|-------------------------------------|------------|------------------------------|------------|---------------------------------|------------|
| Preference  Units:                |       |                 |       |                   |       |                   |       |                                |       |                         |       |                            |       |
| 8.60% Series D (1)                |       | 7/15/07              |       | 700,000                |       | $                      | 175,000    |                                | $          | 21.50                        |       | $                               | 15,050     |   |   |   |
| 8.29% Series K                    |       | 12/10/26             |       | 1,000,000              |       | 50,000                 |       | 4.145                               |       | 4,145                        |       |                            |       |
| 6.48% Series N                    |       | 6/19/08              |       | 600,000                |       | 150,000                |       | 16.20                               |       | 9,720                        |       |                            |       |
| Total Perpetual  Preference Units |       |                 |       | 2,300,000              |       | $                      | 375,000    |                                |       |                         | $          | 28,915                          |       | 7.71 | % |
|                                   |            |                      |            |                        |            |                        |            |                                     |            |                              |            |                                 |            |  |  |  |

----

(1)             TheOperating Partnership redeemed its Series D Preference Units on July 16, 2007at its liquidation value of $175.0 million.

TheOperating Partnership expects to meet its short-term liquidity requirements,including capital 

34

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expendituresrelated to maintaining its existing properties and certain scheduled unsecurednote and mortgage note repayments, generally through its working capital, netcash provided by operating activities and borrowings under its revolving creditfacilities.  The Operating Partnershipconsiders its cash provided by operating activities to be adequate to meetoperating requirements and payments of distributions.  The Operating Partnership also expects tomeet its long-term liquidity requirements, such as scheduled unsecured note andmortgage debt maturities, property acquisitions, financing of construction anddevelopment activities and capital improvements through the issuance ofunsecured notes and equity securities, including additional OP Units, and proceedsreceived from the disposition of certain properties.  In addition, the Operating Partnership hassignificant unencumbered properties available to secure additional mortgageborrowings in the event that the public capital markets are unavailable or thecost of alternative sources of capital is too high.  The fair value of and cash flow from theseunencumbered properties are in excess of the requirements the OperatingPartnership must maintain in order to comply with covenants under its unsecurednotes and line of credit.  Of the $18.1billion in investment in real estate on the Operating Partnership’s balancesheet at June 30, 2007, $12.5 billion or 69.0%, was unencumbered.

TheOperating Partnership’s senior debt credit ratings from Standard & Poors (“S&P”),Moody’s and Fitch are A-, Baa1 and A-, respectively.  EQR’s preferred equity ratings from S&P,Moody’s and Fitch are BBB+, Baa2 and BBB+, respectively.

TheOperating Partnership has a long-term revolving credit facility with potentialborrowings of up to $1.5 billion which matures in February 2012.  This facility may, among other potentialuses, be used to fund property acquisitions, costs for certain properties underdevelopment and short term liquidity requirements.  As of August 1, 2007, $945.0 million wasoutstanding under this facility.

SeeNote 16 in the Notes to Consolidated Financial Statements for discussion of theevents which occurred subsequent to June 30, 2007.

***Capitalizationof Fixed Assets and Improvements to Real Estate***

Our policy with respect to capital expenditures isgenerally to capitalize expenditures that improve the value of the property orextend the useful life of the component asset of the property.  We track improvements to real estate in twomajor categories and several subcategories:

**·**             Replacements*(inside the unit)*.  These include:

**o**                 flooring such as carpets,hardwood, vinyl, linoleum or tile;

**o**                 appliances;

**o**                 mechanical equipment suchas individual furnace/air units, hot water heaters, etc;

**o**                 furniture and fixturessuch as kitchen/bath cabinets, light fixtures, ceiling fans, sinks, tubs,toilets, mirrors, countertops, etc; and

**o**                 blinds/shades.

**Allreplacements are depreciated over a five-year estimated useful life.  We expense as incurred all make-readymaintenance and turnover costs such as cleaning, interior painting ofindividual units and the repair of any replacement item noted above.**

**·**             Building improvements (*outside the unit*).  These include:

**o**                 roof replacement and majorrepairs;

**o**                 paving or majorresurfacing of parking lots, curbs and sidewalks;

**o**                 amenities and common areassuch as pools, exterior sports and playground equipment, lobbies, clubhouses,laundry rooms, alarm and security systems and offices;

**o**                 major building mechanicalequipment systems;

**o**                 interior and exterior structuralrepair and exterior painting and siding;

**o**                 major landscaping and grounds improvement; and

35

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**o**                 vehicles and office andmaintenance equipment.

**Allbuilding improvements are depreciated over a five to ten-year estimated usefullife.  We capitalize buildingimprovements and upgrades only if the item: (i) exceeds $2,500 (selectedprojects must exceed $10,000); (ii) extends the useful life of the asset; and(iii) improves the value of the asset.**

For the six months ended June 30, 2007, our actualimprovements to real estate totaled approximately $117.8 million.  This includes the following (amounts inthousands except for unit and per unit amounts):

CapitalizedImprovements to Real Estate

For the Six Months EndedJune 30,  2007
| ** **                      | ** ** | **Total  Units (1)** | ** ** | **Replacements** | ** ** | **Avg. Per  Unit** | ** ** | **Building  Improvements** | ** ** | **Avg. Per  Unit** | ** ** | **Total** | ** ** | **Avg. Per  Unit** | ** ** |
|---------------------------------|------------|---------------------------|------------|------------------|------------|-------------------------|------------|----------------------------|------------|-------------------------|------------|-----------|------------|-------------------------|------------|
|                            |       |                      |       |             |       |                    |       |                       |       |                    |       |      |       |                    |       |
| Established  Properties (2)     |       | 114,823                   |       | $                | 19,495     |                    | $          | 170                        |       | $                       | 37,141     |      | $          | 323                     |       | $ | 56,636 |   | $ | 493 |   |
| New Acquisition  Properties (3) |       | 25,909                    |       | 4,096            |       | 172                     |       | 27,987                     |       | 1,176                   |       | 32,083    |       | 1,348                   |       |
| Other (4)                       |       | 7,333                     |       | 9,486            |       |                    |       | 19,640                     |       |                    |       | 29,126    |       |                    |       |
| Total                           |       | 148,065                   |       | $                | 33,077     |                    |       |                       | $          | 84,768                  |       |      |       | $                       | 117,845    |   |   |   |
|                                 |            |                           |            |                  |            |                         |            |                            |            |                         |            |           |            |                         |            |  |  |  |  |  |  |

----

(1)             Total units exclude10,846 unconsolidated units and 3,621 military housing (fee managed) units.

(2)             Wholly OwnedProperties acquired prior to January 1, 2005.

(3)             Wholly OwnedProperties acquired during 2005, 2006 and 2007. Per unit amounts are based on a weighted average of 23,807 units.

(4)             Includesproperties either partially owned or sold during the period, commercial space,corporate housing, condominium conversions and $9.8 million included inbuilding improvements spent on fifteen specific assets related to majorrenovations and repositioning of these assets.

The Operating Partnership expects to fundapproximately $58.2 million for capital expenditures for replacements andbuilding improvements for all established properties for the remainder of2007.  This includes an average ofapproximately $1,000 per unit for capital improvements for establishedproperties.

During the six months ended June 30, 2007, theOperating Partnership’s total non-real estate capital additions, such ascomputer software, computer equipment, and furniture and fixtures and leaseholdimprovements to the Operating Partnership’s property management offices and itscorporate offices, were approximately $4.2 million.  The Operating Partnership expects to fundapproximately $3.0 million in total additions to non-real estate property forthe remainder of 2007.

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

***Derivative Instruments***

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

The Operating Partnership has a policy of onlyentering into contracts with major financial institutions based upon theircredit ratings and other factors.  Whenviewed in conjunction with the underlying and offsetting exposure that thederivatives are designed to hedge, the Operating Partnership has not sustaineda material loss from those instruments nor does it anticipate any materialadverse effect on its net income or financial position in the future from theuse of derivatives.

See Note 11 in the Notes to Consolidated FinancialStatements for additional discussion of derivative 

36

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instruments at June 30,2007.

***Other***

**Totaldistributions paid in July 2007 amounted to $146.1 million (excludingdistributions on Partially Owned Properties), which included certaindistributions declared during the second quarter ended**June 30, 2007.

**Off-Balance Sheet Arrangements andContractual Obligations**

The Operating Partnership has co-invested in variousproperties that are unconsolidated and accounted for under the equity method ofaccounting.  Management does not believethese investments have a materially different impact upon the OperatingPartnership’s liquidity, capital resources, credit or market risk than itsproperty management and ownership activities. During 2000 and 2001, the Operating Partnership entered intoinstitutional ventures with an unaffiliated partner.  At the respective closing dates, theOperating Partnership sold and/or contributed 45 properties containing 10,846units to these ventures and retained a 25% ownership interest in the ventures.  The Operating Partnership’s joint venturepartner contributed cash equal to 75% of the agreed-upon equity value of theproperties comprising the ventures, which was then distributed to the OperatingPartnership.  The Operating Partnership’sstrategy with respect to these ventures was to reduce its concentration ofproperties in a variety of markets.

As of June 30, 2007, the Operating Partnership hasnine projects totaling 3,026 units in various stages of development withestimated completion dates ranging through September 30, 2009.  See Note 14 in the Notes to ConsolidatedFinancial Statements for additional discussion.

**See alsoNotes 2 and 6 in the Notes to Consolidated Financial Statements for additionaldiscussion regarding the Operating Partnership’s investments in partially ownedentities.**

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

**CriticalAccounting Policies and Estimates**

The OperatingPartnership has identified six significant accounting policies ascritical accounting policies.  Thesecritical accounting policies are those that have the most impact on thereporting of our financial condition and those requiring significant judgmentsand estimates.  With respect to thesecritical accounting policies, management believes that the application of judgmentsand assessments is consistently applied and produces financial information thatfairly presents the results of operations for all periods presented.  The six critical accounting policies are:

*Impairment of Long-Lived Assets,Including Goodwill*

TheOperating Partnership periodically evaluates its long-lived assets, includingits investments in real estate and goodwill, for indicators of permanentimpairment.  The judgments regarding theexistence of impairment indicators are based on factors such as operationalperformance, market conditions, expected holding period of each asset and legaland environmental concerns.  Futureevents could occur which would cause the Operating Partnership to conclude thatimpairment indicators exist and an impairment loss is warranted.

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*Depreciation of Investment in RealEstate*

The Operating Partnership depreciates the buildingcomponent of its investment in real estate over a 30-year estimated usefullife, building improvements over a 5-year to 10-year estimated useful life andboth the furniture, fixtures and equipment and replacements components over a5-year estimated useful life, all of which are judgmental determinations.

*Cost Capitalization*

See the *Capitalizationof Fixed Assets and Improvements to Real Estate* section fordiscussion of the policy with respect to capitalization vs. expensing of fixedasset/repair and maintenance costs.  Inaddition, the Operating Partnership capitalizes the payroll and associatedcosts of employees directly responsible for and who spend all of their time onthe supervision of major capital and/or renovation projects.  These costs are reflected on the balancesheet as an increase to depreciable property.

The Operating Partnership follows the guidance inSFAS No. 67, *Accounting for Costs andInitial Rental Operations of Real Estate Projects*, for alldevelopment projects and uses its professional judgment in determining whethersuch costs meet the criteria for capitalization or must be expensed asincurred.  The Operating Partnershipcapitalizes interest, real estate taxes and insurance and payroll andassociated costs for those individuals directly responsible for and who spendall of their time on development activities, with capitalization ceasing nolater than 90 days following issuance of the certificate of occupancy.  These costs are reflected on the balancesheet as construction in progress for each specific property.  The Operating Partnership expenses asincurred all payroll costs of on-site employees working directly at ourproperties, except as noted above on our development properties prior tocertificate of occupancy issuance and on specific major renovation at selectedproperties when additional incremental employees are hired.

*Fair Value of FinancialInstruments, Including Derivative Instruments*

The valuation of financial instruments under SFASNo. 107 and SFAS No. 133 and its amendments (SFAS Nos. 137/138/149) requiresthe Operating Partnership to make estimates and judgments that affect the fairvalue of the instruments.  The OperatingPartnership, where possible, bases the fair values of its financialinstruments, including its derivative instruments, on listed market prices andthird party quotes. Where these are not available, the Operating Partnershipbases its estimates on current instruments with similar terms and maturities oron other factors relevant to the financial statements.

*Revenue Recognition*

Rental income attributable to leases is recordedwhen due from residents and is recognized monthly as it is earned, which is notmaterially different than on a straight-line basis.  Leases entered into between a resident and aproperty 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 interestincome are recorded on an accrual basis.

*Share-Based Compensation*

The Company accounts for its share-basedcompensation in accordance with SFAS No. 123(R),  * Share-Based Payment*, effectiveJanuary 1, 2006, which results in compensation expense being recorded based onthe fair value of the share compensation granted.

Any Common Shares issued pursuant to EQR’s incentiveequity compensation and employee share purchase plans will result in theOperating Partnership issuing OP Units to EQR on a one-for-one basis, with theOperating Partnership receiving the net cash proceeds of such issuances.

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The Black-Scholes option valuation model wasdeveloped for use in estimating the fair value of traded options that have novesting restrictions and are fully transferable.  This model is only one method of valuingoptions and the Company’s use of this model should not be interpreted as anendorsement of its accuracy.  Because theCompany’s share options have characteristics significantly different from thoseof traded options, and because changes in the subjective input assumptions canmaterially affect the fair value estimate, in management’s opinion, theexisting models do not necessarily provide a reliable single measure of thefair value of its share options and the actual value of the options may besignificantly different.

**FundsFrom Operations**

**Forthe six months ended June 30, 2007, Funds From Operations (“FFO”) available toOP Units decreased by $8.8 million or 2.4%, as compared to the six months endedJune 30, 2006.**

**For thequarter ended**June 30, 2007, FFO available toOP Units decreased $7.4 million, or 3.8%, as compared to the quarter ended June 30, 2006.

The following is a reconciliation of net income to FFOavailable to OP Units for the six months and quarters ended June 30, 2007 and 2006:

**Funds From Operations**

*(Amounts in thousands)*

*(Unaudited)*
| ** **                                                         | ** ** | **Six Months Ended June 30,** | ** ** | **Quarter Ended June 30,** | ** ** |
|--------------------------------------------------------------------|------------|---------------------------------------------------|------------|-------------------------------------------|------------|
| ** **                                                         | ** ** | **2007**                                          | ** ** | **2006**                                  | ** ** | **2007** | ** ** | **2006** | ** ** |
| Net income                                                         |       | $                                                 | 435,177    |                                      | $          | 576,710 |   | $ | 300,831 |   | $ | 171,162 |   |
| Adjustments:                                                       |       |                                              |       |                                      |       |   |   |   |   |
| Depreciation                                                       |       | 304,052                                           |       | 257,683                                   |       | 155,032 |   | 132,771 |   |
| Depreciation — Non-real estate additions                      |       | (4,173                                            | )          | (3,682                                    | )          | (2,138 | ) | (1,886 | ) |
| Depreciation — Partially Owned and Unconsolidated  Properties |       | 2,081                                             |       | 2,563                                     |       | 1,138 |   | 1,013 |   |
| Net gain on sales of unconsolidated entities                       |       | —                                            |       | (352                                      | )          | — |   | (23 | ) |
| Discontinued operations:                                           |       |                                              |       |                                      |       |   |   |   |   |
| Depreciation                                                       |       | 7,689                                             |       | 39,670                                    |       | 2,035 |   | 17,859 |   |
| Net (gain) on sales of discontinued operations                     |       | (385,323                                          | )          | (502,297                                  | )          | (273,556 | ) | (129,796 | ) |
| Net incremental gain on sales of condominium units                 |       | 13,594                                            |       | 18,553                                    |       | 8,902 |   | 11,426 |   |
| Provision for income taxes — Non-condo sales                  |       | (187                                              | )          | —                                    |       | — |   | — |   |
|                                                               |       |                                              |       |                                      |       |   |   |   |   |
| FFO (1) (2)                                                        |       | 372,910                                           |       | 388,848                                   |       | 192,244 |   | 202,526 |   |
| Preferred  distributions                                           |       | (15,274                                           | )          | (21,724                                   | )          | (7,627 | ) | (10,530 | ) |
| Premium on  redemption of Preference Interests                     |       | —                                            |       | (683                                      | )          | — |   | (9 | ) |
| FFO available to OP  Units (1) (2)                                 |       | $                                                 | 357,636    |                                      | $          | 366,441 |   | $ | 184,617 |   | $ | 191,987 |   |

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***(1)**** **The National Association of Real EstateInvestment Trusts (“NAREIT”) defines funds from operations (“FFO”) (April 2002White Paper) as net income (computed in accordance with accounting principlesgenerally accepted in the United States (“GAAP”)), excluding gains (or losses)from sales of depreciable property, plus depreciation and amortization, andafter adjustments for unconsolidated partnerships and joint ventures.  Adjustments for unconsolidated partnershipsand joint ventures will be calculated to reflect funds from operations on thesame basis.  The April 2002 White Paperstates that gain or loss on sales of property is excluded from FFO forpreviously depreciated operating properties only.  Once the**Operating Partnership**commences the conversion of units to condominiums, itsimultaneously discontinues depreciation of such property. FFO available to OPUnits is calculated on a basis consistent with net income available to OP Unitsand reflects adjustments to net income for preferred distributions and premiumson redemption of preference units/interests in accordance with accountingprinciples generally accepted in the United States.*

***(2)****** The**Operating Partnership**believes that FFO and FFO available to OP Units are helpfulto investors as supplemental measures of the operating performance of a realestate company, because they are recognized measures of performance by the realestate industry and by excluding gains or losses related to dispositions ofdepreciable property and excluding real estate depreciation*

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***(which can varyamong owners of identical assets in similar condition based on historical costaccounting and useful life estimates), FFO and FFO available to OP Units canhelp compare the operating performance of a company’s real estate betweenperiods or as compared to different companies. FFO and FFO available to OP Units do not represent net income, netincome available to OP Units or net cash flows from operating activities inaccordance with GAAP.  Therefore, FFO andFFO available to OP Units should not be exclusively considered as alternativesto net income, net income available to OP Units or net cash flows from operatingactivities as determined by GAAP or as measures of liquidity.  The****Operating Partnership**’s calculation of FFO and FFO available to OP Units maydiffer from other real estate companies due to, among other items, variationsin cost capitalization policies for capital expenditures and, accordingly, maynot be comparable to such other real estate companies.*

**Item 3. Quantitative and Qualitative Disclosures AboutMarket Risk**

**The Operating Partnership’s market risk has notchanged materially from the amounts and information reported in Item 7A, *Quantitative and Qualitative Disclosures About MarketRisk*, to the Operating Partnership’s Form 10-K for the year endedDecember 31, 2006.  See also Note 11 inthe Notes to Consolidated Financial Statements for additional discussion ofderivative instruments.**

**Item 4. Controls and Procedures**

**(a)Evaluation of Disclosure Controls and Procedures:**

**Effectiveas of June 30, 2007, the**Operating Partnership carried out an evaluation, under the supervision and with theparticipation of the Operating Partnership’smanagement, including the Chief Executive Officer and Chief Financial Officerof EQR, of the effectiveness of the Operating Partnership’s disclosure controls and procedures pursuant to Exchange Act Rules13a-15 and 15d-15.  Based on thatevaluation, the Chief Executive Officer and Chief Financial Officer concludedthat the disclosure controls and procedures are effective to ensure thatinformation required to be disclosed by the Operating Partnership in its Exchange Act filings is recorded, processed,summarized and reported within the periods specified in the SEC’s rules andforms.

**(b)  Changes in Internal Control over FinancialReporting:**

**There were no changes to the internalcontrol over financial reporting of the**Operating Partnership identified in connection withthe OperatingPartnership’sevaluation referred to above that occurred during the second quarter of 2007that have materially affected, or are reasonably likely to materially affect,the OperatingPartnership’sinternal control over financial reporting.

**PART II.**        OTHER INFORMATION

**Item 1.  LegalProceedings**

The OperatingPartnership is party to a housingdiscrimination lawsuit brought by a non-profit civil rights organization inApril 2006 in the U.S. District Court for the District of Maryland.  The suit alleges that the Operating Partnership designed and built approximately 300 of itsproperties in violation of the accessibility requirements of the Fair HousingAct and Americans With Disabilities Act. The suit seeks actual and punitive damages, injunctive relief (includingmodification of non-compliant properties), costs and attorneys’ fees.  The Operating Partnership believesit has a number of viable defenses, including that a majority of the namedproperties were completed before the operative dates of the statutes inquestion and/or were not designed or built by the Operating Partnership. Accordingly, the OperatingPartnership is defending the suitvigorously.  Due to the pendency of the Operating Partnership’s defenses and the uncertainty of many othercritical factual and legal issues, it is not possible to determine or predictthe outcome of the suit and as a result, no amounts have been accrued at June30, 2007.  While no assurances can begiven, the Operating Partnership does not believe that the suit, if adverselydetermined, will have a material adverse effect on the Operating Partnership.

The OperatingPartnership does not believe there is any other litigation pending orthreatened against it that, individually or in the aggregate, reasonably may beexpected to have a material adverse effect on the Operating Partnership.

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**Item 1A.  RiskFactors**

**There have been no material changesrelated to the risk factors that were discussed in Part I, Item 1A of the**Operating Partnership’s Form 10-K for the year ended December 31, 2006.

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

(c)  *OP UnitsRepurchased in the Quarter Ended June 30, 2007*

The Operating Partnershiprepurchased the following OP Units during the quarter ended June 30, 2007:
| **Period**          | ** ** | **Total Number   of OP Units   Purchased (1)** | ** ** | **Average Price   Paid Per Unit (1)** | ** ** | **Total Number of OP   Units Purchased as Part  of Publicly Announced  Plans or Programs (1)** | ** ** | **Dollar Value of OP   Units that May Yet   Be Purchased   Under the Plans or  Programs (1)** | ** ** |
|---------------------|------------|------------------------------------------------------------------------------|------------|----------------------------------------------------------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|
|                |       |                                                                         |       |                                                           |       |                                                                                                                                                       |       |                                                                                                                                                                |       |
| May 2007            |       | 8,297,552                                                                    |       | $                                                              | 46.30      |                                                                                                                                                       | 8,297,552  |                                                                                                                                                                | $          | 615,841,198 |   |
| June 2007           |       | 6,022,400                                                                    |       | $                                                              | 46.49      |                                                                                                                                                       | 6,022,400  |                                                                                                                                                                | $          | 335,849,333 |   |
| Second Quarter 2007 |       | 14,319,952                                                                   |       | $                                                              | 46.38      |                                                                                                                                                       | 14,319,952 |                                                                                                                                                                |       |   |

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**(1)**   TheOP Units repurchased during the quarter ended June 30, 2007 represent OP Unitsredeemed in response to repurchases of Common Shares under the Company’spublicly announced share repurchase program approved by its Board ofTrustees.  Of the total sharesrepurchased, 1,052 shares were repurchased at an average price of $50.75 pershare to cover the minimum statutory tax withholding obligations related to thevesting of employees’ restricted shares. The remaining 14,318,900 shares were repurchased in the open market atan average price of $46.38 per share.  Asof June 30, 2007, transactions to repurchase 627,300 of the 14,319,952 CommonShares had not yet settled.  On April 27,2007, the Board of Trustees approved an increase of $200.1 million to theCompany’s authorized share repurchase program. On May 24, 2007, the Board of Trustees approved an additional $500.0million share repurchase program. Considering the above additional authorizations and the repurchaseactivity for the quarter, the Company has $335.8 million remaining availablefor share repurchases as of June 30, 2007.

**Item 6.**    Exhibits — See theExhibit Index

** **

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**SIGNATURES**

Pursuant to the requirements of the Securities Exchange Act of 1934,the registrant has duly caused this report to be signed on its behalf by theundersigned thereunto duly authorized.
|                       |   | ERP OPERATING LIMITED PARTNERHIP |   |
|-----------------------|--------|----------------------------------|--------|
|                  |   | BY: EQUITY RESIDENTIAL           |   |
|                  |   | ITS GENERAL PARTNER              |   |
|                  |   |                             |   |
|                  |   |                             |   |
| Date: August 7,  2007 | By:    | /s/ Donna Brandin                |   |
|                  |   | Donna Brandin                    |   |
|                  |   | Executive Vice President and     |   |
|                  |   | Chief Financial Officer          |   |
|                  |   |                             |   |
|                  |   |                             |   |
| Date: August 7, 2007  | By:    | /s/ Ian S. Kaufman               |   |
|                  |   | Ian S. Kaufman                   |   |
|                  |   | First Vice President and         |   |
|                  |   | Chief Accounting Officer         |   |

 

** **

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**EXHIBIT INDEX**

The exhibits listed below are filed as part of thisreport. References to exhibits or other filings under the caption “Location”indicate that the exhibit or other filing has been filed, that the indexedexhibit and the exhibit referred to are the same and that the exhibit referredto is incorporated by reference.  TheCommission file number for our Exchange Act filings referenced below is0-24920.

 
| Exhibit | ** ** | **Description**                                                                                                                                                                                                                                                                                                                                | ** ** | **Location**                                                                                            |
|---------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------|
| 10.1    |       | 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. |
|    |       |                                                                                                                                                                                                                                                                                                                                           |       |                                                                                                    |
| 10.2    |       | Sixth Amendment to Equity Residential 2002 Share  Incentive Plan.                                                                                                                                                                                                                                                                              |       | Included as Exhibit 10.2 to the Company’s Form 10-Q  for the quarterly period ended June 30, 2007. |
|    |       |                                                                                                                                                                                                                                                                                                                                           |       |                                                                                                    |
| 10.3    |       | Revolving Credit Agreement dated as of May 7, 2007  between ERP Operating Limited Partnership and Bank of America, N.A., as  administrative agent and a lender, JPMorgan Chase Bank, N.A., as syndication  agent and a lender, and Deutsche Bank AG, New York Branch, as documentation  agent and a lender (the “Credit Agreement”). |       | Included as Exhibit 10.1 to the Company’s Form 8-K  dated May 7, 2007, filed on May 10, 2007.      |
|    |       |                                                                                                                                                                                                                                                                                                                                           |       |                                                                                                    |
| 10.4    |       | Guaranty of Payment made as of May 7, 2007 between  Equity Residential and Bank of America, N.A., as administrative agent for the  lenders party to the Credit Agreement.                                                                                                                                                                      |       | Included as Exhibit 10.2 to the Company’s Form 8-K  dated May 7, 2007, filed on May 10, 2007.      |
|    |       |                                                                                                                                                                                                                                                                                                                                           |       |                                                                                                    |
| 31.1    |       | Certification of David J. Neithercut, Chief  Executive Officer of Registrant’s General Partner.                                                                                                                                                                                                                                           |       | Attached herein.                                                                                        |
|    |       |                                                                                                                                                                                                                                                                                                                                           |       |                                                                                                    |
| 31.2    |       | Certification of Donna Brandin, Chief Financial  Officer of Registrant’s General Partner.                                                                                                                                                                                                                                                 |       | Attached herein.                                                                                        |
|    |       |                                                                                                                                                                                                                                                                                                                                           |       |                                                                                                    |
| 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 Registrant’s General Partner.                                                                                                                                |       | 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 Donna  Brandin, Chief Financial Officer of Registrant’s General Partner.                                                                                                                                      |       | Attached herein.                                                                                        |

 

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