**UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C.  20549**

**FORM 10-Q**

**x**** QUARTERLY REPORT PURSUANTTO SECTION 13 OR 15 (d) OFTHE SECURITIES EXCHANGE ACT OF 1934**

**For the quarterly period ended MARCH31, 2007**

**OR**

**o**** TRANSITION REPORT PURSUANTTO SECTION 13 OR 15 (d) OFTHE SECURITIES EXCHANGE ACT OF 1934**

**Commission File Number: 0-24920**

**ERP OPERATING LIMITED PARTNERSHIP**(Exact Name of Registrant as Specified in its Charter)

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

 

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

 

**(312)474-1300**(Registrant’s Telephone Number, Including Area Code)

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

Indicateby check mark whether the registrant is a large accelerated filer, anaccelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” inRule 12b-2 of the Exchange Act.  Large acceleratedfiler x   Acceleratedfiler o  Non-acceleratedfiler o

Indicateby check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act).  Yes o  No  x

 

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**ERPOPERATING LIMITED PARTNERSHIP**

**CONSOLIDATEDBALANCE SHEETS**

**(Amountsin thousands)**

**(Unaudited)**
| ** **                                                | ** ** | **March 31,  2007** | ** **     | **December 31,  2006** | ** ** |
|-----------------------------------------------------------|------------|--------------------------|----------------|-----------------------------|------------|
| **ASSETS**                                                | ** ** | ** **               | ** **     | ** **                  | ** ** |
| Investment in real  estate                                |       |                     |           |                        |       |
| Land                                                      |       | $                        | 3,391,105      |                        | $          | 3,217,672 |   |
| Depreciable  property                                     |       | 13,784,447               |           | 13,376,359                  |       |
| Projects under  development                               |       | 384,534                  |           | 399,131                     |       |
| Land held for  development                                |       | 296,990                  |           | 242,013                     |       |
| Investment in real  estate                                |       | 17,857,076               |           | 17,235,175                  |       |
| Accumulated  depreciation                                 |       | (3,103,329               | )              | (3,022,480                  | )          |
| Investment in real  estate, net                           |       | 14,753,747               |           | 14,212,695                  |       |
|                                                      |       |                     |           |                        |       |
| Cash and cash  equivalents                                |       | 171,742                  |           | 260,277                     |       |
| Investments in  unconsolidated entities                   |       | 4,196                    |           | 4,448                       |       |
| Deposits – restricted                                |       | 188,958                  |           | 391,825                     |       |
| Escrow deposits –  mortgage                          |       | 23,426                   |           | 25,528                      |       |
| Deferred financing  costs, net                            |       | 46,434                   |           | 43,384                      |       |
| Other assets                                              |       | 133,391                  |           | 124,062                     |       |
| **Total  assets**                                         | ** ** | **$**                    | **15,321,894** | ** **                  | **$**      | **15,062,219** | ** ** |
|                                                      |       |                     |           |                        |       |
| **LIABILITIES AND PARTNERS’  CAPITAL**               | ** ** | ** **               | ** **     | ** **                  | ** ** |
| Liabilities:                                              |       |                     |           |                        |       |
| Mortgage notes  payable                                   |       | $                        | 3,105,938      |                        | $          | 3,178,223 |   |
| Notes, net                                                |       | 4,420,467                |           | 4,419,433                   |       |
| Lines of credit                                           |       | 947,500                  |           | 460,000                     |       |
| Accounts payable  and accrued expenses                    |       | 118,319                  |           | 96,699                      |       |
| Accrued interest  payable                                 |       | 70,303                   |           | 91,172                      |       |
| Other  liabilities                                        |       | 367,567                  |           | 311,557                     |       |
| Security  deposits                                        |       | 60,474                   |           | 58,072                      |       |
| Distributions  payable                                    |       | 150,577                  |           | 151,382                     |       |
| **Total  liabilities**                                    | ** ** | **9,241,145**            | ** **     | **8,766,538**               | ** ** |
| ** **                                                | ** ** | ** **               | ** **     | ** **                  | ** ** |
| *Commitments and contingencies*                           | * *   | * *                 | * *       | * *                    | * *   |
| **Minority Interests – Partially  Owned Properties** | ** ** | **20,995**               | ** **     | **26,814**                  | ** ** |
|                                                      |       |                     |           |                        |       |
| Partners’ capital:                                   |       |                     |           |                        |       |
| Preference Units                                          |       | 386,171                  |           | 386,574                     |       |
| Preference  Interests and Junior Preference Units         |       | 11,684                   |           | 11,684                      |       |
| General Partner                                           |       | 5,322,828                |           | 5,511,658                   |       |
| Limited Partners                                          |       | 352,639                  |           | 372,961                     |       |
| Accumulated  other comprehensive loss                     |       | (13,568                  | )              | (14,010                     | )          |
| **Total  partners’ capital**                         | ** ** | **6,059,754**            | ** **     | **6,268,867**               | ** ** |
| **Total liabilities and partners’  capital**         | ** ** | **$**                    | **15,321,894** | ** **                  | **$**      | **15,062,219** | ** ** |

**See accompanying notes**

2

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**ERPOPERATING LIMITED PARTNERSHIP**

**CONSOLIDATEDSTATEMENTS OF OPERATIONS**

**(Amountsin thousands except per OP Unit data)**

**(Unaudited)**
| ** **                                                                                                                                                                    | ** ** | **Quarter Ended March 31,** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------------------------|------------|
| ** **                                                                                                                                                                    | ** ** | **2007**                                   | ** ** | **2006** | ** ** |
| **REVENUES**                                                                                                                                                                  | ** ** | ** **                                 | ** ** | ** ** | ** ** |
| Rental income                                                                                                                                                                 |       | $                                          | 523,898    |   | $ | 459,971 |   |
| Fee and asset management                                                                                                                                                      |       | 2,267                                      |       | 2,487 |   |
| Total revenues                                                                                                                                                                |       | 526,165                                    |       | 462,458 |   |
|                                                                                                                                                                          |       |                                       |       |   |   |
| **EXPENSES**                                                                                                                                                                  | ** ** | ** **                                 | ** ** | ** ** | ** ** |
| Property and maintenance                                                                                                                                                      |       | 141,581                                    |       | 122,061 |   |
| Real estate taxes and insurance                                                                                                                                               |       | 58,977                                     |       | 46,071 |   |
| Property management                                                                                                                                                           |       | 24,904                                     |       | 23,642 |   |
| Fee and asset management                                                                                                                                                      |       | 2,341                                      |       | 2,168 |   |
| Depreciation                                                                                                                                                                  |       | 152,821                                    |       | 128,676 |   |
| General and administrative                                                                                                                                                    |       | 9,966                                      |       | 13,040 |   |
| Impairment                                                                                                                                                                    |       | 236                                        |       | 566 |   |
| Total expenses                                                                                                                                                                |       | 390,826                                    |       | 336,224 |   |
|                                                                                                                                                                          |       |                                       |       |   |   |
| Operating income                                                                                                                                                              |       | 135,339                                    |       | 126,234 |   |
|                                                                                                                                                                          |       |                                       |       |   |   |
| Interest and other income                                                                                                                                                     |       | 2,444                                      |       | 2,352 |   |
| Interest:                                                                                                                                                                     |       |                                       |       |   |   |
| Expense incurred, net                                                                                                                                                         |       | (111,660                                   | )          | (104,555 | ) |
| Amortization of deferred financing costs                                                                                                                                      |       | (2,564                                     | )          | (2,738 | ) |
|                                                                                                                                                                          |       |                                       |       |   |   |
| Income before  allocation to Minority Interests, loss from investments in unconsolidated  entities, net gain on sales of unconsolidated entities and discontinued  operations |       | 23,559                                     |       | 21,293 |   |
| Allocation to  Minority Interests – Partially Owned Properties                                                                                                           |       | (592                                       | )          | (1,521 | ) |
| Loss from  investments in unconsolidated entities                                                                                                                             |       | (229                                       | )          | (230 | ) |
| Net gain on  sales of unconsolidated entities                                                                                                                                 |       | —                                     |       | 329 |   |
| Income from  continuing operations                                                                                                                                            |       | 22,738                                     |       | 19,871 |   |
| Discontinued  operations, net                                                                                                                                                 |       | 111,608                                    |       | 385,677 |   |
| Net income                                                                                                                                                                    |       | $                                          | 134,346    |   | $ | 405,548 |   |
| **ALLOCATION  OF NET INCOME:**                                                                                                                                                | ** ** | ** **                                 | ** ** | ** ** | ** ** |
| Preference Units                                                                                                                                                              |       | $                                          | 7,424      |   | $ | 10,095 |   |
| Preference  Interests and Junior Preference Units                                                                                                                             |       | $                                          | 223        |   | $ | 1,099 |   |
| Premium on  redemption of Preference Interests                                                                                                                                |       | $                                          | —     |   | $ | 674 |   |
|                                                                                                                                                                          |       |                                       |       |   |   |
| General Partner                                                                                                                                                               |       | $                                          | 118,813    |   | $ | 367,720 |   |
| Limited Partners                                                                                                                                                              |       | 7,886                                      |       | 25,960 |   |
| Net Income  available to OP Units                                                                                                                                             |       | $                                          | 126,699    |   | $ | 393,680 |   |
|                                                                                                                                                                          |       |                                       |       |   |   |
| **Earnings  per OP Unit – basic:**                                                                                                                                       | ** ** | ** **                                 | ** ** | ** ** | ** ** |
| Income from  continuing operations available to OP Units                                                                                                                      |       | $                                          | 0.05       |   | $ | 0.03 |   |
| Net income  available to OP Units                                                                                                                                             |       | $                                          | 0.41       |   | $ | 1.27 |   |
| Weighted average  OP Units outstanding                                                                                                                                        |       | 311,697                                    |       | 309,334 |   |
| ** **                                                                                                                                                                    | ** ** | ** **                                 | ** ** | ** ** | ** ** |
| **Earnings  per OP Unit – diluted:**                                                                                                                                     | ** ** | ** **                                 | ** ** | ** ** | ** ** |
| Income from  continuing operations available to OP Units                                                                                                                      |       | $                                          | 0.05       |   | $ | 0.03 |   |
| Net income  available to OP Units                                                                                                                                             |       | $                                          | 0.40       |   | $ | 1.25 |   |
| Weighted average  OP Units outstanding                                                                                                                                        |       | 316,265                                    |       | 314,049 |   |
|                                                                                                                                                                          |       |                                       |       |   |   |
| Distributions declared  per OP Unit outstanding                                                                                                                               |       | $                                          | 0.4625     |   | $ | 0.4425 |   |

**See accompanying notes**

3

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**ERPOPERATING LIMITED PARTNERSHIP**

**CONSOLIDATEDSTATEMENTS OF OPERATIONS (Continued)**

**(Amountsin thousands except per OP Unit data)**

**(Unaudited)**
| ** **                                                                  | ** ** | **Quarter Ended March 31,** | ** ** |
|-----------------------------------------------------------------------------|------------|--------------------------------------------|------------|
| ** **                                                                  | ** ** | **2007**                                   | ** ** | **2006** | ** ** |
|                                                                        |       |                                       |       |   |   |
| Comprehensive  income:                                                      |       |                                       |       |   |   |
| Net income                                                                  |       | $                                          | 134,346    |   | $ | 405,548 |   |
| Other comprehensive income (loss) – derivative and  other instruments: |       |                                       |       |   |   |
| Unrealized holding (losses) gains arising during the  period                |       | (121                                       | )          | 1,523 |   |
| Losses reclassified into earnings from other  comprehensive income          |       | 563                                        |       | 589 |   |
| Comprehensive income                                                        |       | $                                          | 134,788    |   | $ | 407,660 |   |

** **

**See accompanying notes**

4

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**ERPOPERATING LIMITED PARTNERSHIP**

**CONSOLIDATEDSTATEMENTS OF CASH FLOWS**

**(Amountsin thousands)**

**(Unaudited)**
| ** **                                                                           | ** ** | **Quarter Ended March 31,** | ** ** |
|--------------------------------------------------------------------------------------|------------|--------------------------------------------|------------|
| ** **                                                                           | ** ** | **2007**                                   | ** ** | **2006** | ** ** |
| **CASH  FLOWS FROM OPERATING ACTIVITIES:**                                           | ** ** | ** **                                 | ** ** | ** ** | ** ** |
| Net income                                                                           |       | $                                          | 134,346    |   | $ | 405,548 |   |
| *Adjustments  to reconcile net income to net cash provided by operating activities:* | * *   | * *                                   | * *   | * * | * * |
|  Allocation to Minority Interests – Partially  Owned Properties            |       | 592                                        |       | 1,521 |   |
|  Depreciation                                                                   |       | 154,674                                    |       | 146,771 |   |
|  Amortization of deferred financing costs                                       |       | 2,564                                      |       | 2,790 |   |
|  Amortization of discounts and premiums on  debt                                |       | (1,396                                     | )          | (1,894 | ) |
|  Amortization of deferred settlements on  derivative instruments                |       | 218                                        |       | 244 |   |
|  Impairment                                                                     |       | 236                                        |       | 792 |   |
|  Loss from investments in unconsolidated  entities                              |       | 229                                        |       | 230 |   |
|  Distributions from unconsolidated entities –  return on capital           |       | 23                                         |       | 68 |   |
|  Net (gain) on sales of  unconsolidated entities                                |       | —                                     |       | (329 | ) |
|  Net (gain) on sales of discontinued  operations                                |       | (111,767                                   | )          | (372,501 | ) |
|  Loss on debt extinguishments                                                   |       | 141                                        |       | 2,867 |   |
|  Compensation paid with Company  Common Shares                                  |       | 4,902                                      |       | 6,294 |   |
|  Other operating activities, net                                                |       | —                                     |       | (1 | ) |
| * *                                                                             | * *   | * *                                   | * *   | * * | * * |
| *Changes  in assets and liabilities:*                                                | * *   | * *                                   | * *   | * * | * * |
| (Increase) in deposits – restricted                                             |       | (746                                       | )          | (2,303 | ) |
| Decrease in other assets                                                             |       | 5,381                                      |       | 2,664 |   |
| Increase in accounts payable and accrued expenses                                    |       | 16,317                                     |       | 4,627 |   |
| (Decrease) in accrued interest payable                                               |       | (20,869                                    | )          | (8,580 | ) |
| (Decrease) in other liabilities                                                      |       | (20,147                                    | )          | (29,290 | ) |
| Increase in security deposits                                                        |       | 2,402                                      |       | 1,559 |   |
| Net cash provided by operating activities                                            |       | 167,100                                    |       | 161,077 |   |
|                                                                                 |       |                                       |       |   |   |
| **CASH  FLOWS FROM INVESTING ACTIVITIES:**                                           | ** ** | ** **                                 | ** ** | ** ** | ** ** |
|  Investment in real estate – acquisitions                                  |       | (677,058                                   | )          | (444,901 | ) |
|  Investment in real estate –  development/other                            |       | (79,926                                    | )          | (34,831 | ) |
|  Improvements to real estate                                                    |       | (57,354                                    | )          | (51,414 | ) |
|  Additions to non-real estate property                                          |       | (1,738                                     | )          | (1,620 | ) |
|  Interest capitalized for real estate under  development                        |       | (7,866                                     | )          | (4,016 | ) |
|  Proceeds from disposition of real estate,  net                                 |       | 280,592                                    |       | 810,898 |   |
|  Proceeds from disposition of unconsolidated  entities                          |       | —                                     |       | 333 |   |
|  Investments in unconsolidated entities                                         |       | —                                     |       | (1,010 | ) |
|  Distributions from unconsolidated entities –  return of capital           |       | —                                     |       | 92 |   |
|  Decrease (increase) in deposits on real  estate acquisitions, net              |       | 218,224                                    |       | (46,090 | ) |
|  Decrease in mortgage deposits                                                  |       | 2,102                                      |       | 3,391 |   |
| * Consolidation of previously Unconsolidated  Properties:*                      | * *   | * *                                   | * *   | * * | * * |
| Via EITF 04-5 (cash consolidated)                                                    |       | —                                     |       | 1,436 |   |
|  Acquisition of Minority Interests –  Partially Owned Properties           |       | —                                     |       | (1 | ) |
|  Other investing activities, net                                                |       | —                                     |       | 2 |   |
|  Net cash (used for) provided by investing  activities                          |       | (323,024                                   | )          | 232,269 |   |
|                                                                                      |            |                                            |            |  |  |  |  |

 

**See accompanying notes**

5

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**ERPOPERATING LIMITED PARTNERSHIP**

**CONSOLIDATEDSTATEMENTS OF CASH FLOWS (Continued)**

**(Amountsin thousands)**

**(Unaudited)**

 
| ** **                                                                 | ** ** | **Quarter Ended March 31,** | ** ** |
|----------------------------------------------------------------------------|------------|--------------------------------------------|------------|
| ** **                                                                 | ** ** | **2007**                                   | ** ** | **2006** | ** ** |
| **CASH  FLOWS FROM FINANCING ACTIVITIES:**                                 | ** ** | ** **                                 | ** ** | ** ** | ** ** |
| Loan and bond  acquisition costs                                           |       | $                                          | (5,691     | ) | $ | (4,464 | ) |
| *Mortgage  notes payable:*                                                 | * *   | * *                                   | * *   | * * | * * |
| Proceeds                                                                   |       | 33,559                                     |       | 168,787 |   |
| Restricted cash                                                            |       | (14,611                                    | )          | — |   |
| Lump sum payoffs                                                           |       | (135,611                                   | )          | (141,183 | ) |
| Scheduled principal repayments                                             |       | (6,046                                     | )          | (6,810 | ) |
| Prepayment premiums/fees                                                   |       | (141                                       | )          | (2,867 | ) |
| *Notes,  net:*                                                             | * *   | * *                                   | * *   | * * | * * |
| Proceeds                                                                   |       | —                                     |       | 398,052 |   |
| *Lines  of credit:*                                                        | * *   | * *                                   | * *   | * * | * * |
| Proceeds                                                                   |       | 4,052,000                                  |       | 1,884,500 |   |
| Repayments                                                                 |       | (3,564,500                                 | )          | (2,508,500 | ) |
| (Payments on)  proceeds from settlement of derivative instruments          |       | (29                                        | )          | 10,729 |   |
| Proceeds from  sale of OP Units                                            |       | 3,347                                      |       | 3,308 |   |
| Proceeds from  exercise of EQR options                                     |       | 7,041                                      |       | 22,155 |   |
| OP Units  repurchased and retired                                          |       | (142,754                                   | )          | (44,758 | ) |
| Redemption of  Preference Interests                                        |       | —                                     |       | (25,500 | ) |
| Payment of  offering costs                                                 |       | (64                                        | )          | (16 | ) |
| Contributions –  Minority Interests – Partially Owned Properties |       | 1,337                                      |       | 815 |   |
| *Distributions:*                                                           | * *   | * *                                   | * *   | * * | * * |
| OP Units – General Partner                                            |       | (135,829                                   | )          | (127,911 | ) |
| Preference Units                                                           |       | (7,431                                     | )          | (11,150 | ) |
| Preference Interests and Junior Preference Units                           |       | (223                                       | )          | (1,137 | ) |
| OP Units – Limited Partners                                           |       | (9,217                                     | )          | (9,181 | ) |
| Minority Interests – Partially Owned Properties                       |       | (7,748                                     | )          | (266 | ) |
| Net cash provided by (used for) financing activities                       |       | 67,389                                     |       | (395,397 | ) |
| Net (decrease)  in cash and cash equivalents                               |       | (88,535                                    | )          | (2,051 | ) |
| Cash and cash  equivalents, beginning of period                            |       | 260,277                                    |       | 88,828 |   |
| Cash and cash  equivalents, end of period                                  |       | $                                          | 171,742    |   | $ | 86,777 |   |

 

**See accompanying notes**

6

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**ERPOPERATING LIMITED PARTNERSHIP**

**CONSOLIDATEDSTATEMENTS OF CASH FLOWS (Continued)**

**(Amountsin thousands)**

**(Unaudited)**

 
| ** **                                                                     | ** ** | **Quarter Ended March 31,** | ** ** |
|--------------------------------------------------------------------------------|------------|--------------------------------------------|------------|
| ** **                                                                     | ** ** | **2007**                                   | ** ** | **2006** | ** ** |
| ** **                                                                     | ** ** | ** **                                 | ** ** | ** ** | ** ** |
| **SUPPLEMENTAL  INFORMATION:**                                                 | ** ** | ** **                                 | ** ** | ** ** | ** ** |
| Cash paid during  the period for interest                                      |       | $                                          | 141,879    |   | $ | 124,870 |   |
| Cash paid during  the period for income, franchise and excise taxes            |       | $                                          | 77         |   | $ | 899 |   |
|                                                                           |       |                                       |       |   |   |
| *Real  estate acquisitions/dispositions/other:*                                | * *   | * *                                   | * *   | * * | * * |
| Mortgage loans assumed                                                         |       | $                                          | 40,672     |   | $ | 50,604 |   |
| Valuation of OP Units issued                                                   |       | $                                          | —     |   | $ | 27,855 |   |
| Mortgage loans (assumed) by purchaser                                          |       | $                                          | (4,845     | ) | $ | (14,205 | ) |
|                                                                           |       |                                       |       |   |   |
| *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 |   |

** **

**See accompanying notes**

7

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**ERP OPERATING LIMITED PARTNERSHIP**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**(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 March 31, 2007owned an approximate 93.8% ownership interest in, ERPOP.  EQR is structured as an umbrella partnershipREIT (“UPREIT”), under which all property ownership and business operations areconducted through ERPOP and its subsidiaries. References to the “Operating Partnership” include ERPOP and thoseentities owned or controlled by it. References to the “Company” mean EQR and the Operating Partnership.

As of March 31, 2007, the OperatingPartnership, directly or indirectly through investments in title holdingentities, owned all or a portion of 618****properties in 25states and the District of Columbia consisting of 166,324 units.   Theownership breakdown includes (table does not include various uncompleteddevelopment properties):
|                                 | ** ** | **Properties** | ** ** | **Units** | ** ** |
|---------------------------------|------------|----------------|------------|-----------|------------|
| Wholly Owned Properties         |       | 545            |       | 146,473   |       |
| Partially Owned  Properties:    |       |           |       |      |       |
| Consolidated                    |       | 27             |       | 5,445     |       |
| Unconsolidated                  |       | 45             |       | 10,846    |       |
| Military Housing (Fee  Managed) |       | 1              |       | 3,560     |       |
|                            |       | 618            |       | 166,324   |       |

 

**2.**                                      Summaryof Significant 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 the quarterended March 31, 2007 are not necessarily indicative of the results that may beexpected 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 definition 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 has electedTaxable REIT Subsidiary (“TRS”) status for certain of its corporatesubsidiaries, primarily those entities engaged in condominium conversion,corporate housing and sale activities and as a result, these entities incurredboth federal and state income taxes.

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 March 31, 2007, the Operating Partnershiphas recorded a deferred tax asset which was fully offset by a valuationallowance.

*Other*

The Company adopted SFAS No. 123(R), *Share-Based Payment*, as required effective January 1,2006.  SFAS No. 123(R) requires allcompanies to expense share-based compensation (such as share options), as wellas making other revisions to SFAS No. 123. As the Company began expensing all share-based compensation effectiveJanuary 1, 2003, the adoption of SFAS No. 123(R) did not have a material effecton its consolidated statements of operations or financial position.

Any EQR common share of beneficial interest, $0.01per value per share (the “Common Shares”) issued pursuant to EQR’s incentiveequity compensation and employee share purchase plans will result in theOperating Partnership issuing units of limited partnership interest (“OP Units”)to EQR on a one-for-one basis, with the Operating Partnership receiving the netcash proceeds of such issuances.

The OperatingPartnership adopted the disclosure provisions of SFAS No. 150 and FSP No. FAS150-3, *Accounting for Certain Financial Instruments withCharacteristics of both Liabilities and Equity,* effective December31, 2003.  SFAS No. 150 and FSP No. FAS150-3 require the Operating Partnership to make certain disclosures regardingnoncontrolling interests that are classified as equity in the financialstatements of a subsidiary but would be classified as a liability in the parent’sfinancial statements under SFAS No. 150 (e.g., minority interests inconsolidated limited-life subsidiaries). The Operating Partnership is presently the controlling partner invarious consolidated partnerships consisting of 27 properties and 5,445 units andvarious uncompleted development properties having a minority interest bookvalue of $21.0 million at March 31, 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 March 31,2007, the Operating Partnership estimates the value of Minority Interestdistributions would have been approximately $102.8 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 March 31,2007 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 MinorityInterests in the Operating Partnership’s Partially Owned Properties is subjectto change.  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.

The OperatingPartnership adopted EITF Issue No. 04-5, *Determining Whether aGeneral Partner, or*

9

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*theGeneral Partners as a Group, Controls a Limited Partnership or Similar EntityWhen the Limited Partners Have Certain Rights* (“Issue 04-5”),effective January 1, 2006.  Issue 04-5 providesguidance in determining whether a general partner controls a limitedpartnership.  The Operating Partnershipconsolidated its Lexford syndicated portfolio consisting of 20 separatepartnerships (10 properties) containing 1,272 units, all of which were soldOctober 5, 2006.  The adoption did nothave a material effect on 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 amaterial effect on the consolidated results of operations or financialposition.

## **3.*****                                     *Partners’ Capital**

## The following tables present the changes in the Operating Partnership’sissued and outstanding OP Units and the limited partners’ OP Units for the quarterended March 31, 2007:

|                                          | ** ** | **2007**        | ** ** |
|------------------------------------------|------------|-----------------|------------|
| OP Units outstanding at  January 1,      |       | 313,466,216     |       |
|                                     |       |            |       |
| Issued to General  Partner:              |       |            |       |
| Conversion of Series E  Preference Units |       | 17,358          |       |
| Conversion of Series H  Preference Units |       | 724             |       |
| Exercise of EQR options                  |       | 217,165         |       |
| Employee Share Purchase  Plan            |       | 77,537          |       |
| Restricted EQR share  grants, net        |       | 419,539         |       |
|                                     |       |            |       |
| OP Units Other:                          |       |            |       |
| Repurchased and retired                  |       | (4,140,254      | )          |
| **OP Units outstanding at March 31,**    | ** ** | **310,058,285** | ** ** |

 
|                                                                      | ** ** | **2007**       | ** ** |
|----------------------------------------------------------------------|------------|----------------|------------|
| Limited Partner OP  Units outstanding at January 1,                  |       | 19,914,583     |       |
|                                                                 |       |           |       |
| Conversion of Limited  Partner OP Units to EQR Common Shares         |       | (603,298       | )          |
| **Limited Partner OP Units  Outstanding at March 31,**               | ** ** | **19,311,285** | ** ** |
| Limited Partner OP Units Ownership Interest in Operating Partnership |       | 6.2            | %          |

 

**During the quarter ended March31, 2007, the Company repurchased 4,140,254 of its Common Shares at an averageprice of $48.76 per share for total consideration of $201.9 million, of which$142.8 million was paid in cash during the first quarter of 2007 and $59.1million was accrued for at March 31, 2007 (see below).  These shares were retired subsequent to therepurchase.  Concurrent with thesetransactions, the Operating Partnership repurchased and retired 4,140,254 OPUnits previously issued to EQR.  Of thetotal shares repurchased, 80,054 shares were repurchased at an average price of$54.37 per share to cover the minimum statutory tax withholding obligationsrelated to the vesting of employees’ restricted shares.  The remaining 4,060,200 shares wererepurchased in the open market at an average price of $48.65 per share.  As of March 31, 2007, transactions torepurchase 1,245,100 of the 4,140,254 Common Shares had not yet settled.  As of March 31, 2007, the OperatingPartnership has reduced the number of OP Units issued and outstanding by thisamount and recorded a liability of $59.1 million included in other liabilitieson the consolidated balance sheets.**

**The Limited Partners of the Operating Partnership as ofMarch 31, 2007 include various individuals and entities that contributed theirproperties to the Operating Partnership in exchange for OP Units.  Subject to certain**

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**restrictions,the Limited Partners may exchange their OP Units for EQR Common Shares on aone-for-one basis.**

**EQR contributes all net proceedsfrom its various equity offerings (including proceeds from exercise of optionsfor EQR Common Shares) to the Operating Partnership.  In return for those contributions, EQRreceives a number of OP Units in ERPOP equal to the number of Common Shares ithas issued in the equity offering (or in the case of a preferred equityoffering, a number of preference units in ERPOP equal in number and having thesame terms as the preferred shares issued in the equity offering).**

The following table presents the Operating Partnership’sissued and outstanding “Preference Units” as of March 31, 2007 and December 31,2006:
| *** ***                                                                                                                                                                                      | *** *** | ** **                             | ** ** | ** **                    | ** ** | **Annual**                           | ** ** | **Amounts in thousands** | *** *** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------|----------------------------------------|------------|-------------------------------|------------|--------------------------------------|------------|------------------------------------|--------------|
| *** ***                                                                                                                                                                                      | *** *** | **Redemption  Date (1) (2)** | ** ** | **Conversion  Rate (2)** | ** ** | **Dividend per  Unit (3)** | ** ** | **March  31, 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 March 31, 2007 and December 31, 2006  (4)                       |         | 7/15/07                                |       | N/A                           |       | $                               | 21.50      |                               | $       | 175,000 |   | $  | 175,000 |   |
|                                                                                                                                                                                              |         |                                   |       |                          |       |                                 |       |                               |         |   |   |
| 7.00% Series E  Cumulative Convertible Preference Units; liquidation value $25 per unit;  419,216 and 434,816 units issued and outstanding at March 31, 2007 and  December 31, 2006, respectively |         | 11/1/98                                |       | 1.1128                        |       | $                               | 1.75       |                               | 10,480       |   | 10,871 |   |
|                                                                                                                                                                                              |         |                                   |       |                          |       |                                 |       |                               |         |   |   |
| 7.00% Series H  Cumulative Convertible Preference Units; liquidation value $25 per unit;  27,634 and 28,134 units issued and outstanding at March 31, 2007 and December  31, 2006, respectively   |         | 6/30/98                                |       | 1.4480                        |       | $                               | 1.75       |                               | 691          |   | 703 |   |
|                                                                                                                                                                                              |         |                                   |       |                          |       |                                 |       |                               |         |   |   |
| 8.29% Series K  Cumulative Redeemable Preference Units; liquidation value $50 per unit;  1,000,000 units issued and outstanding at March 31, 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 March 31, 2007 and December 31, 2006  (4)                       |         | 6/19/08                                |       | N/A                           |       | $                               | 16.20      |                               | 150,000      |   | 150,000 |   |
|                                                                                                                                                                                              |         |                                   |       |                          |       |                                 |       |                               |         |   |   |
|                                                                                                                                                                                              |         |                                   |       |                          |       |                                 |       | $                                  | 386,171      |   | $ | 386,574 |   |

 

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

(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) orOP Units (in the case of Series H), in whole or in part, at various redemptionprices per unit based upon the contractual conversion rate, plus accrued andunpaid distributions, if any, in conjunction with the concurrentredemption/conversion of the corresponding EQR Preferred Shares.

(3)          Dividends on all series of Preference Unitsare payable quarterly at various pay dates. Dividends listed for Series D and N are Preference Unit rates and theequivalent depositary unit annual dividends are $2.15 and $1.62 per unit,respectively.

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

The following table presents theissued and outstanding Preference Interests as of March 31, 2007 and December31, 2006:

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| *** ***                                                                                                                                                                       | *** *** | ** **                             | ** ** | ** **                    | ** ** | **Annual**                           | ** ** | **Amounts in thousands** | *** *** |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------|----------------------------------------|------------|-------------------------------|------------|--------------------------------------|------------|------------------------------------|--------------|
| *** ***                                                                                                                                                                       | *** *** | **Redemption  Date (1) (2)** | ** ** | **Conversion  Rate (2)** | ** ** | **Dividend per  Unit (3)** | ** ** | **March  31, 2007**           | ** **   | **December  31, 2006** | *** *** |
| Preference Interests:                                                                                                                                                              |         |                                   |       |                          |       |                                 |       |                               |         |   |   |
|                                                                                                                                                                               |         |                                   |       |                          |       |                                 |       |                               |         |   |   |
| 7.625% Series J  Cumulative Convertible Redeemable Preference Units; liquidation value $50 per  unit; 230,000 units issued and outstanding at March 31, 2007 and December 31, 2006 |         | 12/14/06                               |       | 1.4108                        |       | $                                    | 3.8125     |                               | $            | 11,500 |   | $ | 11,500 |   |
|                                                                                                                                                                               |         |                                   |       |                          |       |                                 |       | $                                  | 11,500       |   | $ | 11,500 |   |
|                                                                                                                                                                                    |              |                                        |            |                               |            |                                      |            |                                    |              |  |  |  |  |  |

 

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

(2)          On or after the tenth anniversary of the issuance (the “Conversion Date”),the Series J Preference Interests are exchangeable at the option of the holder(in whole but not in part) on a one-for-one basis for a respective reservedseries of EQR Preferred Shares.  Inaddition, on or after the Conversion Date, the Series J Preference Interestsmay be converted under certain circumstances at the option of the holder (inwhole but not in part) to Common Shares based upon the contractual conversionrate, plus accrued and unpaid distributions, if any.  Prior to the Conversion Date, the Series JPreference Interests may be converted under certain circumstances at the optionof the holder (in whole but not in part) to Common Shares based upon thecontractual conversion rate, plus accrued and unpaid distributions, if any, ifthe issuer has called the series for redemption (the “Accelerated ConversionRight”).

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

**Thefollowing table presents the Operating Partnership’s issued and outstandingJunior Convertible Preference Units (the “Junior Preference Units”) as of March31, 2007 and December 31, 2006:**
| ** **                                                                                                                                                 | ** ** | ** **                    | ** ** | ** **                    | ** ** | **Annual**                           | ** ** | **Amounts in thousands** | ** ** |
|------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------------|------------|-------------------------------|------------|--------------------------------------|------------|------------------------------------|------------|
| ** **                                                                                                                                                 | ** ** | **Redemption  Date (2)** | ** ** | **Conversion  Rate (2)** | ** ** | **Dividend  per Unit (1)** | ** ** | **March  31, 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 March 31, 2007 and December 31, 2006 |       | 07/29/09                      |       | 1.020408                      |       | $                                    | 2.00       |                               | $          | 184 |   | $ | 184 |   |
|                                                                                                                                                       |       |                          |       |                          |       |                                 |       | $                                  | 184        |   | $ | 184 |   |
|                                                                                                                                                            |            |                               |            |                               |            |                                      |            |                                    |            |  |  |  |  |  |

 

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(1)          Dividends on the JuniorPreference Units are payable quarterly at various pay dates.

 

(2)          On or after the tenthanniversary of the issuance (the “Redemption Date”), the Series B JuniorPreference Units may be converted into OP Units at the option of the OperatingPartnership based on the contractual conversion rate.  Prior to the Redemption Date, the holders mayelect to convert the Series B Junior Preference Units to OP Units under certaincircumstances based on the contractual conversion rate.  The contractual rate is based upon a ratiodependent upon the closing price of EQR’s Common Shares.

 

**4.**                                      Real Estate

**Thefollowing table summarizes the carrying amounts for investment in real estate(at cost) as of March 31, 2007 and December 31, 2006 (Amounts in thousands):**

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|                                    | ** ** | **March 31, 2007** | ** ** | **December 31, 2006** | ** ** |
|------------------------------------|------------|------------------------------|------------|---------------------------------|------------|
| Land                               |       | $                            | 3,391,105  |                            | $          | 3,217,672 |   |
| Depreciable property:              |       |                         |       |                            |       |
| Buildings and  improvements        |       | 12,918,797                   |       | 12,563,807                      |       |
| Furniture,  fixtures and equipment |       | 865,650                      |       | 812,552                         |       |
| Projects under  development:       |       |                         |       |                            |       |
| Land                               |       | 125,006                      |       | 137,505                         |       |
| Construction-in-progress           |       | 259,528                      |       | 261,626                         |       |
| Land held for  development:        |       |                         |       |                            |       |
| Land                               |       | 246,114                      |       | 202,695                         |       |
| Construction-in-progress           |       | 50,876                       |       | 39,318                          |       |
| Investment in real  estate         |       | 17,857,076                   |       | 17,235,175                      |       |
| Accumulated  depreciation          |       | (3,103,329                   | )          | (3,022,480                      | )          |
| Investment in real estate, net     |       | $                            | 14,753,747 |                            | $          | 14,212,695 |   |

 

**Duringthe quarter ended March 31, 2007, the Operating Partnership acquired the followingfrom unaffiliated parties (purchase price in thousands):**
|                       | ** ** | **Properties** | ** ** | **Units** | ** ** | **Purchase  Price** | ** ** |
|-----------------------|------------|----------------|------------|-----------|------------|---------------------|------------|
| Rental  Properties    |       | 13             |       | 3,899     |       | $                   | 674,156    |   |
| Land Parcels  (three) |       | —         |       | —    |       | 42,450              |       |
|                  |       | 13             |       | 3,899     |       | $                   | 716,606    |   |

 

During the quarter ended March 31, 2007, the OperatingPartnership disposed of the following to unaffiliated parties (sales price in thousands):
|                    | ** ** | **Properties** | ** ** | **Units** | ** ** | **Sales Price** | ** ** |
|--------------------|------------|----------------|------------|-----------|------------|----------------------|------------|
| Rental  Properties |       | 12             |       | 3,711     |       | $                    | 253,930    |   |
| Condominium  Units |       | 2              |       | 157       |       | 37,280               |       |
|               |       | 14             |       | 3,868     |       | $                    | 291,210    |   |

 

**The Operating Partnership recognized a net gain on sales ofdiscontinued operations of approximately $111.8 million on the above sales.**

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

**As of May 2, 2007, in addition to the properties that weresubsequently acquired as discussed in Note 16, the Operating Partnership hadentered into separate agreements to acquire the following (purchase price inthousands):**
|                       | ** ** | **Properties/  Parcels** | ** ** | **Units** | ** ** | **Purchase  Price** | ** ** |
|-----------------------|------------|--------------------------|------------|-----------|------------|---------------------|------------|
| Operating  Properties |       | 6                        |       | 1,528     |       | $                   | 361,200    |   |
| Land Parcels          |       | 1                        |       | —    |       | 53,052              |       |
| Total                 |       | 7                        |       | 1,528     |       | $                   | 414,252    |   |

 

**As of May 2, 2007, in addition to the properties that weresubsequently disposed as discussed in Note 16, the Operating Partnership hadentered into separate agreements to dispose of the following (sales price inthousands):**

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|                         | ** ** | **Properties/  Parcels** | ** ** | **Units** | ** ** | **Sales Price** | ** ** |
|-------------------------|------------|--------------------------|------------|-----------|------------|----------------------|------------|
| Operating  Properties   |       | 19                       |       | 4,635     |       | $                    | 397,429    |   |
| Development  Properties |       | 1                        |       | —    |       | 44,700               |       |
| Land Parcels            |       | 1                        |       | —    |       | 3,000                |       |
| Total                   |       | 21                       |       | 4,635     |       | $                    | 445,129    |   |

 

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 thereofwill not differ in material respects from those summarized in the precedingparagraphs.

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

The Operating Partnership hasco-invested in various properties with unrelated third parties which are eitherconsolidated or accounted for under the equity method of accounting (unconsolidated).  The following table summarizes the OperatingPartnership’s investments in partially owned entities as of March 31, 2007(amounts in thousands except for project and unit amounts):
| ** **               | ** ** | **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)       |       | $                                                 | 98,860     |                                         | $          | 90,237 |   | $ | 61,000 |   | $ | 286,957 |   | $ | 537,054 |   | $ | 121,200 |   |
| Minority  Ownership      |       | —                                            |       | —                                       |       | — |   | 13,321 |   | 13,321 |   | 363,600 |   |
| Total (at 100%)          |       | $                                                 | 98,860     |                                         | $          | 90,237 |   | $ | 61,000 |   | $ | 300,278 |   | $ | 550,375 |   | $ | 484,800 |   |
|                          |            |                                                   |            |                                              |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

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(1)          Project and unit countsexclude all uncompleted development projects until those projects aresubstantially completed.

(2)          All debt is non-recourseto the Operating Partnership with the exception of $28.3 million in mortgagebonds on one development project.

(3)          Represents the OperatingPartnership’s economic ownership interest.

(4)          Projects included hereare substantially complete. However, they may still require additional exteriorand interior work for all units to be available for leasing.

 

**7.****                                      Deposits – Restricted**

The following table presents thedeposits – restricted as of March 31, 2007 and December 31, 2006 (amounts inthousands):

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|                                         | ** ** | **March  31, 2007** | ** ** | **December  31, 2006** | ** ** |
|-----------------------------------------|------------|--------------------------|------------|-----------------------------|------------|
|                                    |       |                     |       |                        |       |
| Tax-deferred (1031)  exchange proceeds  |       | $                        | 81,468     |                        | $          | 299,392 |   |
| Earnest money on  pending acquisitions  |       | 12,870                   |       | 13,170                      |       |
| Resident security and  utility deposits |       | 37,727                   |       | 36,260                      |       |
| Restricted deposits on  debt            |       | 34,805                   |       | 20,194                      |       |
| Other                                   |       | 22,088                   |       | 22,809                      |       |
| Totals                                  |       | $                        | 188,958    |                        | $          | 391,825 |   |

 

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

As of March 31, 2007, the Operating Partnership hadoutstanding mortgage debt of approximately $3.1 billion.

During the quarter ended March31, 2007, the Operating Partnership:

·                  Repaid $141.7 million of mortgage loans;

·                  Assumed $40.7 million of mortgage debt on certainproperties in connection with their acquisitions;

·                  Obtained $33.6 million of new mortgage loans oncertain properties; and

·                  Was released from $4.8 million of mortgage debtassumed by the purchaser on disposed properties.

The Operating Partnership recordedapproximately $0.1 million and $0.3 million of prepayment penalties andwrite-offs of unamortized deferred financing costs, respectively, as additionalinterest related to debt extinguishment of mortgages during the quarter endedMarch 31, 2007.

As of March 31, 2007, scheduled maturities for the OperatingPartnership’s outstanding mortgage indebtedness were at various dates through September1, 2045.  At March 31, 2007, the interestrate range on the Operating Partnership’s mortgage debt was 3.32% to12.465%.  During the quarter ended March31, 2007, the weighted average interest rate on the Operating Partnership’smortgage debt was 5.73%.

**9.****                                      Notes**

As of March 31, 2007, the Operating Partnership had outstanding unsecurednotes of approximately $4.4 billion.  Therewere no significant transactions during the quarter ended March 31, 2007.

As of March 31, 2007, scheduled maturities for the OperatingPartnership’s outstanding notes were at various dates through 2029.  At March 31, 2007, the interest rate range onthe Operating Partnership’s notes was 3.85% to 7.625%.  During the quarter ended March 31, 2007, theweighted average interest rate on the Operating Partnership’s notes was 5.70%.

**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.  Advances under the credit facility bearinterest at variable rates based upon LIBOR at various interest periods plus aspread dependent upon the Operating Partnership’s credit rating or based onbids received from the lending group. EQR has guaranteed the Operating Partnership’s credit facility up to themaximum 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

15

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maximum amount and for the full term of the facility.  This credit facility was repaid in full andterminated on February 28, 2007.  The OperatingPartnership recorded $0.4 million of write-offs of unamortized deferredfinancing costs as additional interest in connection with this termination.

As of March 31, 2007, $947.5 million was outstanding and $70.8 millionwas restricted (dedicated to support letters of credit and not available forborrowing) on the $1.5 billion revolving credit facility.  During the quarter ended March 31, 2007, theweighted average interest rate under the credit facilities was 5.63%.

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

The following table summarizes theconsolidated derivative instruments at March 31, 2007 (dollar amounts are inthousands):
|                                        | ** ** | **Fair Value  Hedges (1)** | ** ** | **Forward Starting  Swaps (2)** | ** ** | **Development  Cash Flow  Hedges (3)** | ** ** |
|----------------------------------------|------------|--------------------------------------|------------|-------------------------------------------|------------|--------------------------------------------------|------------|
| Current Notional  Balance              |       | $                                    | 370,000    |                                      | $          | 100,000                                          |       | $ | — |   |
| Lowest Possible  Notional              |       | $                                    | 370,000    |                                      | $          | 100,000                                          |       | $ | — |   |
| Highest Possible  Notional             |       | $                                    | 370,000    |                                      | $          | 100,000                                          |       | $ | 54,947 |   |
| Lowest Interest Rate                   |       | 3.245                                | %          | 5.596                                     | %          | N/A                                              |       |
| Highest Interest Rate                  |       | 3.787                                | %          | 5.596                                     | %          | 5.850                                            | %          |
| Earliest Maturity Date                 |       | 2009                                 |       | 2017                                      |       | 2009                                             |       |
| Latest Maturity Date                   |       | 2009                                 |       | 2017                                      |       | 2009                                             |       |
| Estimated Asset (Liability) Fair Value |       | $                                    | (10,713    | )                                         | $          | (3,230                                           | )          | $ | 19 |   |

 

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

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

(3)          Development Cash Flow Hedges – Convertsoutstanding floating rate debt to a fixed interest rate (swaps) and/or locks-ina maximum interest rate (caps).

 

**On March 31, 2007, the net derivative instrumentswere reported at their fair value as other liabilities of approximately $13.9million and other assets of $19,000.  Asof March 31, 2007, there were approximately $14.2 million in deferred losses,net, included in accumulated other comprehensive loss.  Based on the estimated fair values of the netderivative instruments at March 31, 2007, the Operating Partnership mayrecognize an estimated $2.5 million of accumulated other comprehensive loss asadditional interest expense during the twelve months ending March 31, 2008.**

**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):
|                                                                     | ** ** | **Quarter Ended March 31,** | ** ** |
|---------------------------------------------------------------------|------------|--------------------------------------------|------------|
| ** **                                                          | ** ** | **2007**                                   | ** ** | **2006** | ** ** |
| **Numerator for net income per OP  Unit – basic and diluted:** | ** ** | ** **                                 | ** ** | ** ** | ** ** |
| Income from continuing  operations                                  |       | $                                          | 22,738     |   | $ | 19,871 |   |
| Allocation to  Preference Units                                     |       | (7,424                                     | )          | (10,095 | ) |
| Allocation to  Preference Interests and Junior Preference Units     |       | (223                                       | )          | (1,099 | ) |
| Allocation to premium  on redemption of Preference Interests        |       | —                                     |       | (674 | ) |
|                                                                |       |                                       |       |   |   |
| Income from continuing  operations available to OP Units            |       | 15,091                                     |       | 8,003 |   |
| Discontinued  operations, net                                       |       | 111,608                                    |       | 385,677 |   |
| Numerator for net income per OP Unit – basic and diluted       |       | $                                          | 126,699    |   | $ | 393,680 |   |

 

16

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|                                                                                                              | ** ** | **Quarter Ended March 31,** | ** ** |
|--------------------------------------------------------------------------------------------------------------|------------|--------------------------------------------|------------|
| ** **                                                                                                   | ** ** | **2007**                                   | ** ** | **2006** | ** ** |
| **Denominator for net income per  OP Unit – basic and diluted:**                                        | ** ** | ** **                                 | ** ** | ** ** | ** ** |
| Denominator for net  income per OP Unit – basic                                                         |       | 311,697                                    |       | 309,334 |   |
| Effect of dilutive  securities:                                                                              |       |                                       |       |   |   |
| Dilution for OP  Units issuable upon assumed exercise/vesting of EQR’s share  options/restricted shares |       | 4,568                                      |       | 4,715 |   |
| Denominator for net  income per OP Unit – diluted                                                       |       | 316,265                                    |       | 314,049 |   |
|                                                                                                         |       |                                       |       |   |   |
| Net income per OP Unit –  basic                                                                         |       | $                                          | 0.41       |   | $ | 1.27 |   |
| Net income per OP Unit –  diluted                                                                       |       | $                                          | 0.40       |   | $ | 1.25 |   |
|                                                                                                         |       |                                       |       |   |   |
| **Net income per OP Unit – basic:**                                                                     | ** ** | ** **                                 | ** ** | ** ** | ** ** |
| Income from continuing  operations available to OP Units                                                     |       | $                                          | 0.048      |   | $ | 0.026 |   |
| Discontinued  operations, net                                                                                |       | 0.358                                      |       | 1.247 |   |
| Net income per OP Unit –  basic                                                                         |       | $                                          | 0.406      |   | $ | 1.273 |   |
|                                                                                                         |       |                                       |       |   |   |
| **Net income per OP Unit –  diluted:**                                                                  | ** ** | ** **                                 | ** ** | ** ** | ** ** |
| Income from continuing  operations available to OP Units                                                     |       | $                                          | 0.048      |   | $ | 0.025 |   |
| Discontinued  operations, net                                                                                |       | 0.353                                      |       | 1.228 |   |
| Net income per OP Unit – diluted                                                                        |       | $                                          | 0.401      |   | $ | 1.253 |   |

 

*Convertible preference interests/units that could beconverted into 853,151 and 1,615,465 weighted average Common Shares (whichwould be contributed to the Operating Partnership in exchange for OP Units) forthe quarters ended March 31, 2007 and 2006, respectively, were outstanding butwere not included in the computation of diluted earnings per OP Unit becausethe effects would be anti-dilutive.  Inaddition, the effect of the Common Shares/OP Units that could ultimately beissued upon the conversion/exchange of the Operating Partnership’s $650.0million exchangeable senior notes were not included in the computation ofdiluted earnings per OP Unit because the effects would be anti-dilutive.*

**13.****                               DiscontinuedOperations**

The OperatingPartnership has presented separately as discontinued operations in all periodsthe results of operations for all consolidated assets disposed of on or after January1, 2002 (the date of adoption of SFAS No. 144) and all operations related tocondominium conversion properties effective upon their respective transfer intoa 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 the quartersended March 31, 2007 and 2006 (amounts in thousands).

17

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|                                               | ** ** | **Quarter Ended March 31,** | ** ** |
|-----------------------------------------------|------------|--------------------------------------------|------------|
| ** **                                    | ** ** | **2007**                                   | ** ** | **2006** | ** ** |
| **REVENUES**                                  | ** ** | ** **                                 | ** ** | ** ** | ** ** |
| Rental income                                 |       | $                                          | 7,749      |   | $ | 74,789 |   |
| Total revenues                                |       | 7,749                                      |       | 74,789 |   |
|                                          |       |                                       |       |   |   |
| **EXPENSES (1)**                              | ** ** | ** **                                 | ** ** | ** ** | ** ** |
| Property and  maintenance                     |       | 4,484                                      |       | 25,461 |   |
| Real estate taxes and  insurance              |       | 1,209                                      |       | 9,746 |   |
| Property management                           |       | 141                                        |       | 2,733 |   |
| Depreciation                                  |       | 1,853                                      |       | 18,095 |   |
| General and administrative                    |       | 2                                          |       | 211 |   |
| Impairment                                    |       | —                                     |       | 226 |   |
| Total expenses                                |       | 7,689                                      |       | 56,472 |   |
|                                          |       |                                       |       |   |   |
| Discontinued operating  income                |       | 60                                         |       | 18,317 |   |
|                                          |       |                                       |       |   |   |
| Interest and other  income                    |       | 87                                         |       | 980 |   |
| Interest (2):                                 |       |                                       |       |   |   |
| Expense  incurred, net                        |       | (306                                       | )          | (6,069 | ) |
| Amortization of  deferred financing costs     |       | —                                     |       | (52 | ) |
| Discontinued operations                       |       | (159                                       | )          | 13,176 |   |
| Net gain on sales of  discontinued operations |       | 111,767                                    |       | 372,501 |   |
| Discontinued operations, net                  |       | $                                          | 111,608    |   | $ | 385,677 |   |

 

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*(1)**            **Includesexpenses paid in the current period for properties sold or held for sale inprior periods related to the Operating Partnership’s period of ownership.*

*(2)**            **Includesonly interest expense specific to secured mortgage notes payable for propertiessold and/or held for sale.*

For the properties sold during the quarter ended March 31, 2007(excluding condominium conversion properties), the investment in real estate,net of accumulated depreciation, and the mortgage notes payable balances atDecember 31, 2006 were $152.1 million and $11.9 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 $98.1 million and $95.4 million at March 31,2007 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 housing discriminationlawsuit brought by a non-profit civil rights organization in April 2006 in theU.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 With DisabilitiesAct.  The suit seeks actual and punitivedamages, injunctive relief (including modification of non-compliantproperties), costs and attorneys’ fees.  TheOperating Partnership believes it has a number of viable defenses, includingthat a majority of the named properties were completed before the operativedates of the statutes in question and/or were not designed or built by the OperatingPartnership.  Accordingly, the OperatingPartnership is defending the suit vigorously. Due to the

18

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pendency of the Operating Partnership’s defenses and the uncertainty ofmany other critical factual and legal issues, it is not possible to determineor predict the outcome of the suit and as a result, no amounts have beenaccrued at March 31, 2007. While no assurances can be given, the OperatingPartnership does not believe that the suit, if adversely determined, will havea material adverse effect on the Operating Partnership.

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

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 quarter ended March 31, 2007, the OperatingPartnership received $3.8 million in insurance proceeds and recorded anadditional $2.8 million of receivables in anticipation of proceedsexpected.  As of March 31, 2007, areceivable of $4.1 million and a liability of $2.5 million are included in otherassets and other liabilities, respectively, on the consolidated balance sheets.

**As of March 31, 2007, the Operating Partnership has tenprojects totaling 3,228 units in various stages of development with estimatedcompletion dates ranging through June 30, 2009. The primary development agreements currently in place have the followingkey terms:**

**·**                  The first development partner has the right, at anytime following completion of a project, to stipulate a value for such projectand offer to sell its interest in the project to the Operating Partnershipbased on such value.  If the OperatingPartnership chooses not to purchase the interest, the Operating Partnershipmust agree to a sale of the project to an unrelated third party at suchvalue.  The Operating Partnership’spartner must exercise this right as to all projects subject to the agreement withinfive years after the receipt of the final certificate of occupancy on the lastdeveloped property.

**·**                        The second development partnerhas the right, at any time following completion of a project, to require the OperatingPartnership to purchase the partners’ interest in that project at a mutuallyagreeable price.  If the OperatingPartnership and the partner are unable to agree on a price, both parties willobtain appraisals.  If the appraisedvalues vary by more than 10%, both the Operating Partnership and its partnerwill agree on a third appraiser to determine which original appraisal isclosest to its determination of value. The Operating Partnership may elect at that time not to purchase theproperty and instead, authorize its partner to sell the project at or above theagreed-upon value to an unrelated third party. Five years following the receipt of the final certificate of occupancy onthe last developed property, the Operating Partnership must purchase, at theagreed-upon price, any projects remaining unsold.

·                  Thethird development partner has the exclusive right for six months followingstabilization, as defined, to market a subject project for sale.  Thereafter, either the Operating Partnershipor its development partner may market a subject project for sale.  If the Operating Partnership’s developmentpartner proposes the sale, the Operating Partnership may elect to purchase theproject at the price proposed by its partner or defer the sale until twoindependent appraisers appraise the project. If the two appraised values vary by more than 5%, a third appraiser willbe chosen to determine the fair market value of the property.  Once a value has been determined, the OperatingPartnership may elect to purchase the property or authorize its developmentpartner to sell the project at the agreed-upon value.

**In addition, the Operating Partnership has variousdeal-specific development agreements with partners, the overall terms of whichare similar in nature to those described above.**

**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.

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The Operating Partnership’sprimary business is owning, managing, and operating multifamily residentialproperties, which includes the generation of rental and other related incomethrough 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 have been aggregated by geography in a manneridentical to that which is provided to its chief operating decision maker.

The Operating Partnership’sfee and asset management, development (including FIN No. 46 partially ownedproperties), condominium conversion and corporate housing (Equity CorporateHousing or “ECH”) activities are immaterial and do not individually meet thethreshold requirements of a reportable segment as provided for in SFAS No. 131and as such, have been aggregated in the tables presented below.

All revenues are from externalcustomers and there is no customer who contributed 10% or more of the OperatingPartnership’s total revenues during the quarters ended March 31, 2007 and 2006,respectively.

Theprimary financial measure for the Operating Partnership’s rental real estatesegment is net operating income (“NOI”), which represents rental income less: 1)property and maintenance expense; 2) real estate taxes and insurance expense;and 3) property management expense (all as reflected in the accompanyingconsolidated statements of operations). The Operating Partnership believes that NOI is helpful to investors as asupplemental measure of the operating performance of a real estate companybecause it is a direct measure of the actual operating results of the OperatingPartnership’s apartment communities. Current year NOI is compared to prior year NOI and current year budgetedNOI as a measure of financial performance. The following table presents NOI for each segement from our rental realestate specific to continuing operations as well as total assets for the quartersended March 31, 2007 and 2006, respectively (amounts in thousands):

20

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| ** **                    | ** ** | **Quarter Ended March 31, 2007** | ** ** |
|-------------------------------|------------|------------------------------------------------------|------------|
| ** **                    | ** ** | **Northeast**                                        | ** ** | **South** | ** ** | **West** | ** ** | **Other (3)** | ** ** | **Total** | ** ** |
| Rental income:                |       |                                                 |       |   |   |   |   |   |   |   |   |
| Same store (1)                |       | $                                                    | 127,100    |   | $ | 161,334 |   | $ | 159,967 |   | $ | — |   | $ | 448,401 |   |
| Non-same  store/other (2) (3) |       | 15,688                                               |       | 23,805 |   | 15,443 |   | 20,561 |   | 75,497 |   |
| Total rental income           |       | 142,788                                              |       | 185,139 |   | 175,410 |   | 20,561 |   | 523,898 |   |
|                          |       |                                                 |       |   |   |   |   |   |   |   |   |
| Operating expenses:           |       |                                                 |       |   |   |   |   |   |   |   |   |
| Same store (1)                |       | 50,709                                               |       | 67,313 |   | 56,818 |   | — |   | 174,840 |   |
| Non-same  store/other (2) (3) |       | 8,111                                                |       | 10,447 |   | 6,871 |   | 25,193 |   | 50,622 |   |
| Total operating  expenses     |       | 58,820                                               |       | 77,760 |   | 63,689 |   | 25,193 |   | 225,462 |   |
|                          |       |                                                 |       |   |   |   |   |   |   |   |   |
| NOI:                          |       |                                                 |       |   |   |   |   |   |   |   |   |
| Same store (1)                |       | 76,391                                               |       | 94,021 |   | 103,149 |   | — |   | 273,561 |   |
| Non-same  store/other (2) (3) |       | 7,577                                                |       | 13,358 |   | 8,572 |   | (4,632 | ) | 24,875 |   |
| Total NOI                     |       | $                                                    | 83,968     |   | $ | 107,379 |   | $ | 111,721 |   | $ | (4,632 | ) | $ | 298,436 |   |
|                          |       |                                                 |       |   |   |   |   |   |   |   |   |
| Total assets                  |       | $                                                    | 4,429,632  |   | $ | 4,647,198 |   | $ | 4,642,573 |   | $ | 1,602,491 |   | $ | 15,321,894 |   |

----

(1)          Properties owned for allof both periods ending March 31, 2007 and March 31, 2006 which represented133,703 units.

(2)          Properties acquiredafter January 1, 2006.

(3)          Other includes ECH,development, condominium conversion overhead of $1.2 million and othercorporate operations.  Also reflects the$4.2 million elimination of rental income recorded in Northeast, South and Westoperating segments related to ECH.
| ** **                          | ** ** | **Quarter Ended March 31, 2006** | ** ** |
|-------------------------------------|------------|------------------------------------------------------|------------|
| ** **                          | ** ** | **Northeast**                                        | ** ** | **South** | ** ** | **West** | ** ** | **Other (3)** | ** ** | **Total** | ** ** |
| Rental income:                      |       |                                                 |       |   |   |   |   |   |   |   |   |
|  Same store  (1)               |       | $                                                    | 121,135    |   | $ | 154,085 |   | $ | 151,016 |   | $ | — |   | $ | 426,236 |   |
|  Non-same  store/other (2) (3) |       | 9,056                                                |       | 3,725 |   | 3,024 |   | 17,930 |   | 33,735 |   |
| Total rental  income                |       | 130,191                                              |       | 157,810 |   | 154,040 |   | 17,930 |   | 459,971 |   |
|                                |       |                                                 |       |   |   |   |   |   |   |   |   |
| Operating  expenses:                |       |                                                 |       |   |   |   |   |   |   |   |   |
|  Same store  (1)               |       | 48,453                                               |       | 63,524 |   | 54,156 |   | — |   | 166,133 |   |
|  Non-same  store/other (2) (3) |       | 4,468                                                |       | 1,525 |   | 1,496 |   | 18,152 |   | 25,641 |   |
| Total operating  expenses           |       | 52,921                                               |       | 65,049 |   | 55,652 |   | 18,152 |   | 191,774 |   |
|                                |       |                                                 |       |   |   |   |   |   |   |   |   |
| NOI:                                |       |                                                 |       |   |   |   |   |   |   |   |   |
|  Same store  (1)               |       | 72,682                                               |       | 90,561 |   | 96,860 |   | — |   | 260,103 |   |
|  Non-same  store/other (2) (3) |       | 4,588                                                |       | 2,200 |   | 1,528 |   | (222 | ) | 8,094 |   |
| Total NOI                           |       | $                                                    | 77,270     |   | $ | 92,761 |   | $ | 98,388 |   | $ | (222 | ) | $ | 268,197 |   |

----

(1)          Properties owned for allof both periods ending March 31, 2007 and March 31, 2006 which represented133,703 units.

(2)          Properties acquiredafter January 1, 2006.

(3)          Other includes ECH,condominium conversion overhead of $1.7 million, hurricane related propertydamage net of reimbursement from insurance companies and other corporateoperations. Also reflects the $3.4 million elimination of rental incomerecorded 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.

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

The following table presents areconciliation of NOI from our rental real estate specific to continuingoperations for the quarters ended March 31, 2007 and 2006, respectively.
|                                          | ** ** | **Quarter Ended March 31,** | ** ** |
|------------------------------------------|------------|--------------------------------------------|------------|
| ** **                               | ** ** | **2007**                                   | ** ** | **2006** | ** ** |
| ** **                               | ** ** | **(Amounts in thousands)**       | ** ** |
|                                     |       |                                       |       |   |   |
| Rental income                            |       | $                                          | 523,898    |   | $ | 459,971 |   |
| Property and  maintenance expense        |       | (141,581                                   | )          | (122,061 | ) |
| Real estate  taxes and insurance expense |       | (58,977                                    | )          | (46,071 | ) |
| Property  management expense             |       | (24,904                                    | )          | (23,642 | ) |
| Total operating  expenses                |       | (225,462                                   | )          | (191,774 | ) |
| Net operating income                     |       | $                                          | 298,436    |   | $ | 268,197 |   |

 

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

*Subsequent Events*

Subsequent to March 31, 2007 and through May 2, 2007,the Operating Partnership:

·                  Acquired $314.1million of residential properties consisting of ten properties and 1,380 unitsand one land parcel;

·                  Sold tenresidential properties consisting of 2,198 units for $205.5 million (excluding condominiumunits);

·                  Assumed$111.7 million of mortgage debt in connection with the acquisition of eightproperties;

·                  Repaid $69.6million of mortgage loans and $50.0 million of unsecured notes; and

·                  Wasreleased from $54.5 million of mortgage debt assumed by the purchaser ondisposed properties.

OnApril 27, 2007, the Board of Trustees approved an increase of $200.1 million tothe Company’s authorized share repurchase program.  As of April 27, 2007 and after giving effectto the above increase, the Company was authorized to repurchase $500.0 millionof additional Common Shares.  Followingthe increased authorization (from May 2,2007 through May 4, 2007), the Company repurchased an additional 1,296,000of its Common Shares at an average price of $46.00 per share for totalconsideration of $59.6 million.  As aresult, the Company is now authorized to repurchase $440.4 million ofadditional Common Shares as of May 4, 2007.

*Other*

The OperatingPartnership incurred impairment losses of approximately $0.2 million and $0.8million (including discontinued operations) for the quarters ended March 31,2007 and 2006, respectively, as a result of the write-off of various pursuitand out-of-pocket costs for terminated acquisition, disposition (includinghalted condominium conversions) and development transactions.

The OperatingPartnership recorded a reduction to general and administrative expense ofapproximately $1.6 million in the first quarter of 2007 due to the successfulresolution of a certain lawsuit in Florida, resulting in the reversal of themajority of a previously established litigation reserve.

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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’s annual report on Form 10-K for the yearended 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 Operating Partnership’s managementbelieves the assumptions underlying its forward-looking statements arereasonable, such information is inherently subject to uncertainties and mayinvolve certain risks, which could cause actual results, performance, orachievements 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 Operating Partnership assumes noobligation to update or supplement forward-looking statements because ofsubsequent events.   Factors that mightcause such differences include, but are not limited to the following:

·                  Weintend to actively acquire and develop multifamily properties for rentaloperations and/or conversion into condominiums, as well as upgrade and sellexisting properties as individual condominiums. We may underestimate the costs necessary to bring an acquired or developmentproperty up to standards established for its intended market position.  Additionally, we expect that other major realestate investors with significant capital will compete with us for attractiveinvestment opportunities or may also develop properties in markets where wefocus our development efforts.  Thiscompetition may increase prices for multifamily properties or decrease theprice at which we expect to sell individual properties.  We may not be in a position or have theopportunity in the future to make suitable property acquisitions on favorableterms.  We also plan to develop moreproperties ourselves in addition to co-investing with our development partnersfor either the 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 andconstruction materials), competition and local government regulation;

·                  Sourcesof capital to the Operating Partnership or labor and materials required formaintenance, repair, capital expenditure or development are more expensive thananticipated;

·                  Occupancylevels and market rents may be adversely affected by national and localeconomic and market conditions including, without limitation, new constructionof multifamily housing, slow employment growth, availability of low interestmortgages for single-family home buyers and the potential for geopoliticalinstability, all of which are beyond 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 Partnership undertakes no obligation to publicly releaseany revisions to these forward-looking statements, which may be made to reflectevents or circumstances 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.

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**Results of Operations**

Inconjunction with our business objectives and operating strategy, the OperatingPartnership has continued to invest or recycle its capital investment inapartment communities located in strategically targeted markets during the quarterended March 31, 2007.  In summary, we:

·                  Acquired $674.2 millionof properties consisting of 13 properties and 3,899 units and $42.5 million ofland parcels, all of which we deem to be in our strategic targeted markets; and

·                  Sold $253.9 million ofapartment properties consisting of 12 properties and 3,711 units as well as 157condominium units for $37.3 million.

The Operating Partnership’s primary financial measurefor evaluating each 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 OperatingPartnership believes that NOI is helpful to investors as a supplemental measureof the operating performance of a real estate company because it is a directmeasure of the actual operating results of the Operating Partnership’sapartment communities.

Propertiesthat the Operating Partnership owned for all of both of the quarters ended March31, 2007 and 2006 (the “First Quarter 2007 Same Store Properties”), whichrepresented 133,703 units, impacted the Operating Partnership’s results ofoperations.  The First Quarter 2007 Same StoreProperties are discussed in the following paragraphs.

The OperatingPartnership’s acquisition, disposition, completed development and consolidationof previously unconsolidated property activities also impacted overall resultsof operations for the quarters ended March 31, 2007 and 2006.  The impacts of these activities are alsodiscussed in greater detail in the following paragraphs.

***Comparisonof the quarter ended March 31, 2007 to the quarter ended March 31, 2006***

For the quarter ended March 31,2007, income from continuing operations increased by approximately $2.9 millionwhen compared to the quarter ended March 31, 2006.  The increase in continuing operations isdiscussed below.

**Revenuesfrom the First Quarter 2007 Same-Store Properties increased $22.2 millionprimarily as a result of higher rental rates charged to residents.  Expenses from the First Quarter 2007 Same-StoreProperties increased $8.7 million primarily due to higher payroll, building/maintenanceand real estate taxes.  The followingtables provide comparative same-store results and statistics for the FirstQuarter 2007 Same-Store Properties:**

**FirstQuarter 2007 vs. First Quarter 2006**

**Quarterover Quarter Same-Store Results/Statistics**

**$ inThousands (except for Average Rental Rate) – 133,703 Same-Store Units**

 
| ** **      | ** ** | **Results**  | ** ** | **Statistics** | ** ** |
|-----------------|------------|--------------|------------|----------------|------------|
| **Description** | ** ** | **Revenues** | ** ** | **Expenses**   | ** ** | **NOI** | ** ** | **Average  Rental  Rate (1)** | ** ** | **Occupancy** | ** ** | **Turnover** | ** ** |
| Q1 2007         |       | $            | 448,401    |           | $          | 174,840 |   | $ | 273,561 |   | $ | 1,181 |   | 94.8 | % | (13.5 | %) |
| Q1 2006         |       | $            | 426,236    |           | $          | 166,133 |   | $ | 260,103 |   | $ | 1,124 |   | 94.6 | % | (13.9 | %) |
| Change          |       | $            | 22,165     |           | $          | 8,707 |   | $ | 13,458 |   | $ | 57 |   | 0.2 | % | 0.4 | % |
| Change          |       | 5.2          | %          | 5.2            | %          | 5.2 | % | 5.1 | % |   |   |   |   |

 

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(1) Average rental rate is defined as total rental revenues divided bythe weighted average occupied units for the period.

 

**The following table presents a reconciliation ofoperating income per the consolidated statements of**

24

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**operationsto NOI for the First Quarter 2007 Same-Store Properties:**
|                                  | ** ** | **Quarter Ended March 31,** | ** ** |
|----------------------------------|------------|--------------------------------------------|------------|
| ** **                       | ** ** | **2007**                                   | ** ** | **2006** | ** ** |
| ** **                       | ** ** | **(Amounts in thousands)**       | ** ** |
| ** **                       | ** ** | ** **                                 | ** ** | ** ** | ** ** |
| Operating income                 |       | $                                          | 135,339    |   | $ | 126,234 |   |
| Adjustments:                     |       |                                       |       |   |   |
| Non-same-store operating results |       | (24,875                                    | )          | (8,094 | ) |
| Fee and asset management revenue |       | (2,267                                     | )          | (2,487 | ) |
| Fee and asset management expense |       | 2,341                                      |       | 2,168 |   |
| Depreciation                     |       | 152,821                                    |       | 128,676 |   |
| General and administrative       |       | 9,966                                      |       | 13,040 |   |
| Impairment                       |       | 236                                        |       | 566 |   |
|                             |       |                                       |       |   |   |
| Same-store NOI                   |       | $                                          | 273,561    |   | $ | 260,103 |   |

 

**For properties that the Operating Partnershipacquired prior to January 1, 2006 and expects to continue to own throughDecember 31, 2007, the Operating Partnership anticipates the following samestore results for the full year ending December 31, 2007:**

2007 Same-StoreAssumptions
| Physical Occupancy |   | 95.0%          |
|--------------------|--------|----------------|
| Revenue Change     |   | 5.00% to 6.00% |
| Expense Change     |   | 3.50% to 4.50% |
| NOI Change         |   | 5.50% to 7.50% |

 

**These 2007 assumptions are based on currentexpectations and are forward-looking.**

**Non-same-store operating results increased $16.8 millionand consist primarily of properties acquired in calendar years 2007 and 2006 aswell 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 decreased $0.4 millionprimarily as a result of lower income earned from Ft. Lewis.  As of March 31, 2007 and 2006, the OperatingPartnership managed 15,025 and 14,888 units, respectively, for third partiesand unconsolidated entities.

**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 increased by approximately $1.3 million or 5.3%.  This increase is primarily attributable tohigher overall payroll-related costs.**

Depreciation expense fromcontinuing operations, which includes depreciation on non-real estate assets,increased $24.1 million primarily as a result of additional depreciationexpense on newly acquired properties and capital expenditures for all propertiesowned.

General and administrative expenses, which includecorporate operating expenses, decreased $3.1 million primarily as a result of adecrease of $1.4 million in performanceshare expenses and a reduction of $1.6 million in legal expenses due to thesuccessful resolution of a certain lawsuit in Florida resulting in the reversalof the majority of a previously established litigation reserve.  The Operating Partnership anticipates thatgeneral and administrative expenses will approximate $48.0 million to $51.0million for the year ending December 31, 2007. The above assumption is based on current expectations and isforward-looking.

25

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Impairment from continuing operations decreased $0.3million primarily as a result of fewer write-offs for development propertiesduring the quarter ended March 31, 2007.

**Interest and other income from continuing operationswas consistent between the periods under comparison.  The Operating Partnership anticipates thatinterest and other income will approximate $5.0 million to $7.0 million for theyear ending December 31, 2007.  The aboveassumption is based on current expectations and is forward-looking.**

Interest expense from continuingoperations, including amortization of deferred financing costs, increasedapproximately $6.9****millionprimarily as a result of higher overall debt levels outstanding, partiallyoffset by lower overall effective interest rates.  During the quarter ended March 31, 2007, the OperatingPartnership capitalized interest costs of approximately $7.9 million ascompared to $4.0 million for the quarter ended March 31, 2006.  This capitalization of interest primarilyrelates to projects under development. The effective interest cost on all indebtedness for the quarter ended March31, 2007 was 5.93% as compared to 6.25% for the quarter ended March 31, 2006.  The Operating Partnership anticipates thatinterest expense (including discontinued operations) will approximate $465.0million to $490.0 million for the year ending December 31, 2007.  The above assumption is based on currentexpectations and is forward-looking.

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

Net gain on sales of unconsolidated entities decreased$0.3 million between the periods under comparison as the Operating Partnershiprecognized a gain on one unconsolidated property sold in 2006.

Discontinued operations, net decreasedapproximately $274.1 million between the periods under comparison.  This decrease is primarily due to a decreasein the number of properties sold during the quarter ended March 31, 2007 ascompared to the quarter ended March 31, 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 had approximately $260.3 million of cash and cashequivalents and $470.7 million available under its revolving credit facilities(net of $69.3 million which was restricted/dedicated to support letters ofcredit and not available for borrowing). After taking into effect the various transactions discussed in thefollowing paragraphs and the net cash provided by operating activities, the OperatingPartnership’s cash and cash equivalents balance at March 31, 2007 was approximately$171.7 million and the amount available on the Operating Partnership’srevolving credit facilities was $481.7 million (net of $70.8 million which wasrestricted/dedicated to support letters of credit and not available forborrowing).  Effective February 28, 2007,the Operating Partnership increased its capacity on its revolving creditfacility to $1.5 billion.  See Note 10for further discussion.

During the quarter ended March 31, 2007, the OperatingPartnership generated proceeds from various transactions, which included thefollowing:

·                  Disposed of 14 properties and variousindividual condominium units, receiving net proceeds of approximately $280.6million;

·                  Obtained $33.6 million in newmortgage financing; and

·                  Issued approximately 0.3 million OPUnits and received net proceeds of $10.4 million.

 

**Duringthe quarter ended March 31, 2007, the above proceeds were primarily utilizedto:**

·                  Invest $79.9million primarily in development projects;

·                  Acquire 13properties and three land parcels, utilizing cash of $677.1 million;

·                  Repurchase 2.9 millionOP Units utilizing cash of $142.8 million (see Note 3); and

·                  Repay$141.7 million of mortgage loans.

26

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**Dependingon its analysis of market prices, economic conditions, and other opportunitiesfor the investment of available capital, the Company may repurchase its CommonShares pursuant to its existing share buyback program authorized by the Boardof Trustees.  On April 27, 2007, theBoard of Trustees approved an increase of $200.1 million to the Company’s authorizedshare repurchase program.  As of April27, 2007 and after giving effect to the above increase, the Company wasauthorized to repurchase $500.0 million of additional Common Shares.  EQR repurchased $201.9 million (4,140,254shares at an average price per share of $48.76) of its Common Shares during thequarter ended March 31, 2007. **Concurrent with thesetransactions, the Operating Partnership repurchased and retired 4,140,254 OPUnits previously issued to EQR.  See Notes 3 and 16 for further discussion.

**The Operating Partnership’s totaldebt summary and debt maturity schedules as of March 31, 2007, are as follows:**

**Debt Summary as of March31, 2007**

**(Amounts in thousands)**

** **
| ** **                                 | ** ** | **Amounts (1)** | ** ** | **% of Total** | ** ** | **Weighted  Average  Rates (1)** | ** ** | **Weighted  Average  Maturities  (years)** | ** ** |
|--------------------------------------------|------------|----------------------|------------|--------------------------|------------|---------------------------------------|------------|--------------------------------------------|------------|
| Secured                                    |       | $                    | 3,105,938  |                     | 36.7       | %                                     | 5.73       | %                                          | 6.3        |   |
| Unsecured                                  |       | 5,367,967            |       | 63.3                     | %          | 5.69                                  | %          | 6.5                                        |       |
| Total                                      |       | $                    | 8,473,905  |                     | 100.0      | %                                     | 5.71       | %                                          | 6.4        |   |
|                                       |       |                 |       |                     |       |                                  |       |                                       |       |
| Fixed Rate Debt:                           |       |                 |       |                     |       |                                  |       |                                       |       |
| Secured – Conventional                |       | $                    | 2,158,687  |                     | 25.5       | %                                     | 6.23       | %                                          | 4.5        |   |
| Secured – Tax Exempt                  |       | 11,200               |       | 0.1                      | %          | 6.46                                  | %          | 19.7                                       |       |
| Unsecured – Public/Private            |       | 4,162,825            |       | 49.1                     | %          | 5.69                                  | %          | 6.6                                        |       |
| Unsecured – Tax Exempt                |       | 111,390              |       | 1.3                      | %          | 5.06                                  | %          | 22.1                                       |       |
| Fixed Rate Debt                            |       | 6,444,102            |       | 76.0                     | %          | 5.86                                  | %          | 6.2                                        |       |
|                                       |       |                 |       |                     |       |                                  |       |                                       |       |
| Floating Rate  Debt:                       |       |                 |       |                     |       |                                  |       |                                       |       |
| Secured – Conventional                |       | 414,162              |       | 4.9                      | %          | 6.04                                  | %          | 2.0                                        |       |
| Secured – Tax Exempt                  |       | 521,889              |       | 6.2                      | %          | 3.44                                  | %          | 16.9                                       |       |
| Unsecured – Public                    |       | 146,252              |       | 1.7                      | %          | 6.53                                  | %          | 2.2                                        |       |
| Unsecured – Revolving Credit Facility |       | 947,500              |       | 11.2                     | %          | 5.63                                  | %          | 4.9                                        |       |
| Floating Rate Debt                         |       | 2,029,803            |       | 24.0                     | %          | 5.13                                  | %          | 7.2                                        |       |
|                                       |       |                 |       |                     |       |                                  |       |                                       |       |
| Total                                      |       | $                    | 8,473,905  |                     | 100.0      | %                                     | 5.71       | %                                          | 6.4        |   |

 

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(1) Net of the effect ofany derivative instruments.  Weightedaverage rates are for the quarter ended March 31, 2007.

Note:  The Operating Partnership capitalizedinterest of approximately $7.9 million and $4.0 million for the quarters endedMarch 31, 2007 and 2006, respectively.

27

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**Debt Maturity Schedule as ofMarch 31, 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     |       | $                        | 237,777    |                        | $          | 85,147    |       | $                        | 322,924    |                                                                     | 3.8        | %                                                         | 6.60       | % | 6.67 | % |
| 2008     |       | 479,938                  |       | 119,571                     |       | 599,509   |       | 7.1                      | %          | 6.65                                                                     | %          | 6.61                                                      | %          |
| 2009     |       | 457,821                  |       | 380,367                     |       | 838,188   |       | 9.9                      | %          | 6.35                                                                     | %          | 5.35                                                      | %          |
| 2010     |       | 279,576                  |       | —                      |       | 279,576   |       | 3.3                      | %          | 7.05                                                                     | %          | 7.05                                                      | %          |
| 2011 (2) |       | 1,448,748                |       | 24,150                      |       | 1,472,898 |       | 17.4                     | %          | 5.52                                                                     | %          | 5.49                                                      | %          |
| 2012 (3) |       | 555,380                  |       | 947,500                     |       | 1,502,880 |       | 17.7                     | %          | 6.49                                                                     | %          | 5.94                                                      | %          |
| 2013     |       | 567,010                  |       | —                      |       | 567,010   |       | 6.7                      | %          | 5.93                                                                     | %          | 5.93                                                      | %          |
| 2014     |       | 503,771                  |       | 34,460                      |       | 538,231   |       | 6.4                      | %          | 5.27                                                                     | %          | 5.26                                                      | %          |
| 2015     |       | 357,579                  |       | —                      |       | 357,579   |       | 4.2                      | %          | 6.40                                                                     | %          | 6.40                                                      | %          |
| 2016     |       | 1,088,845                |       | —                      |       | 1,088,845 |       | 12.8                     | %          | 5.32                                                                     | %          | 5.32                                                      | %          |
| 2017+    |       | 467,657                  |       | 438,608                     |       | 906,265   |       | 10.7                     | %          | 6.70                                                                     | %          | 5.55                                                      | %          |
| Total    |       | $                        | 6,444,102  |                        | $          | 2,029,803 |       | $                        | 8,473,905  |                                                                     | 100.0      | %                                                         | 5.97       | % | 5.77 | % |

 

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**(1)**          Net of theeffect of any derivative instruments. Weighted average rates are as of March 31, 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 on August18, 2011, August 15, 2016 and August 15, 2021.

** **

**(3)**          Includes$947.5 million outstanding on the Operating Partnership’s $1.5 billionunsecured revolving credit facility, which matures on February 28, 2012.

** **

**The following table provides a summary of the OperatingPartnership’s unsecured debt as of March 31, 2007:**

28

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**UnsecuredDebt Summary as of March 31, 2007**

**(Amountsin thousands)**

** **

** **
|                             | ** ** | ** ** | ** **      | ** ** | ** **      | ** ** | ** ** | **Unamortized** | ** ** | ** **  | ** ** |
|----------------------------------|------------|------------|-----------------|------------|-----------------|------------|------------|-----------------|------------|-------------|------------|
|                             | ** ** | **Coupon** | ** **      | **Due**    | ** **      | **Face**   | ** ** | **Premium/**    | ** ** | **Net**     | ** ** |
|                             | ** ** | **Rate**   | ** **      | **Date**   | ** **      | **Amount** | ** ** | **(Discount)**  | ** ** | **Balance** | ** ** |
| ** **                       | ** ** | ** ** | ** **      | ** ** | ** **      | ** ** | ** ** | ** **      | ** ** | ** **  | ** ** |
| **Fixed Rate Notes:**            | ** ** | ** ** | ** **      | ** ** | ** **      | ** ** | ** ** | ** **      | ** ** |
|                             |       | 7.625      | %               | 04/15/07   |            | $          | 50,000     |            | $          | 7           |       | $ | 50,007 |   |
|                             |       | 6.900      | %               | 08/01/07   |            | 50,000     |       | (8              | )          | 49,992      |       |
|                             |       | 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    |       | (605            | )          | 299,395     |       |
|                             |       | 6.950      | %               | 03/02/11   |            | 300,000    |       | 3,445           |       | 303,445     |       |
|                             |       | 6.625      | %               | 03/15/12   |            | 400,000    |       | (1,456          | )          | 398,544     |       |
|                             |       | 5.200      | %               | 04/01/13   |            | 400,000    |       | (710            | )          | 399,290     |       |
|                             |       | 5.250      | %               | 09/15/14   |            | 500,000    |       | (458            | )          | 499,542     |       |
|                             |       | 6.584      | %               | 04/13/15   |            | 300,000    |       | (892            | )          | 299,108     |       |
|                             |       | 5.125      | %               | 03/15/16   |            | 500,000    |       | (480            | )          | 499,520     |       |
|                             |       | 5.375      | %               | 08/01/16   |            | 400,000    |       | (1,732          | )          | 398,268     |       |
|                             |       | 7.125      | %               | 10/15/17   |            | 150,000    |       | (684            | )          | 149,316     |       |
|                             |       | 7.570      | %               | 08/15/26   |            | 140,000    |       | —          |       | 140,000     |       |
|                             |       | 3.850      | %               | 08/15/26   |   (3) | 650,000    |       | (7,888          | )          | 642,112     |       |
| Floating Rate Adjustments        |       |       |   (2) | (150,000   | )               | —     |       | (150,000        | )          |
|                             |       |       |            |       |            | 4,174,286  |       | (11,461         | )          | 4,162,825   |       |
| **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) | (3,748     | )               | —     |       | (3,748          | )          |
|                             |       |       |            |       |            | 146,252    |       | —          |       | 146,252     |       |
|                             |       |       |            |       |            |       |       |            |       |        |       |
| **Revolving Credit Facility:**   |       | 02/28/12   |   (4) | 947,500    |            | —     |       | 947,500         |       |
| **Total Unsecured Debt**         |       |       |            | $          | 5,379,428       |       | $          | (11,461         | )          | $           | 5,367,967  |   |
|                                  |            |            |                 |            |                 |            |            |                 |            |             |            |  |  |  |  |  |

 

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(1)          Notes are private.  All other unsecured debt is public.

(2)          $150.0 million in fairvalue interest rate swaps converts 50% of the 4.750% Notes due June 15, 2009 toa floating interest rate.

(3)          Convertible notes matureon 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)          Represents amountoutstanding on the Operating Partnership’s $1.5 billion unsecured revolvingcredit facility which matures on February 28, 2012.

**As of May 9, 2007, an unlimited amount of debt securities remainsavailable for issuance by the Operating Partnership under a registrationstatement that became automatically effective upon filing with the SEC in June2006 (under SEC regulations enacted in 2005, the registration statementautomatically expires on June 29, 2009 and does not contain a maximum issuanceamount) and $956.5 million in equity securities remains available for issuance byEQR under a registration statement the SEC declared effective in February**

29

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**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 March 31, 2007 is presented inthe following 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/interests; and (iii) theliquidation value of all perpetual preference units outstanding.**

**CapitalStructure as of March 31, 2007**

**(Amountsin thousands except for unit and per unit amounts)**

** **
| Secured Debt                                 |       |        |       | $              | 3,105,938      |       | 36.7       | %          |      |   |
|----------------------------------------------|------------|-------------|------------|----------------|----------------|------------|------------|------------|-----------|--------|
| Unsecured Debt                               |       |        |       | 4,420,467      |           | 52.1       | %          |       |      |
| Revolving Credit Facility                    |       |        |       | 947,500        |           | 11.2       | %          |       |      |
| **Total  Debt**                              |       |        |       | **8,473,905**  | ** **     | **100.0**  | **%**      | **35.5**   | **%**     |
|                                         |       |        |       |           |           |       |       |       |      |
| OP Units                                     |       | 310,058,285 |       |           |           |       |       |       |      |
| OP Unit  Equivalents (see below)             |       | 838,519     |       |           |           |       |       |       |      |
| Total  outstanding at quarter-end            |       | 310,896,804 |       |           |           |       |       |       |      |
| EQR Common Share  Price at March 31, 2007    |       | $           | 48.23      |           |           |       |       |       |      |   |
|                                         |       |        |       | 14,994,553     |           | 97.6       | %          |       |      |
| Perpetual  Preference Units (see below) |       |        |       | 375,000        |           | 2.4        | %          |       |      |
| **Total  Equity**                            | ** ** | ** **  | ** ** | **15,369,553** | ** **     | **100.0**  | **%**      | **64.5**   | **%**     |
|                                         |       |        |       |           |           |       |       |       |      |
| **Total Market Capitalization**              | ** ** | ** **  | ** ** | **$**          | **23,843,458** | ** ** | ** ** | ** ** | **100.0** | **%**  |
|                                              |            |             |            |                |                |            |            |            |           |        |  |

 

ConvertiblePreference Units/Interests as of March 31, 2007

(Amountsin thousands except for unit/interest and per unit/interest amounts)

 
| **Series**                                    | ** ** | **Redemption  Date** | ** ** | **Outstanding  Units/Interests** | ** ** | **Liquidation  Value** | ** ** | **Annual  Dividend Per  Unit/Interest** | ** ** | **Annual  Dividend  Amount** | ** ** | **Weighted  Average Rate** | ** ** | **Conversion  Ratio** | ** ** | **OP Unit  Equivalents** | ** ** |
|-----------------------------------------------|------------|----------------------|------------|----------------------------------|------------|------------------------|------------|----------------------------------------------|------------|------------------------------|------------|---------------------------------|------------|-----------------------|------------|-------------------------------|------------|
| Preference Units:                             |       |                 |       |                             |       |                   |       |                                         |       |                         |       |                            |       |                  |       |                          |       |
| 7.00% Series E                                |       | 11/1/98              |       | 419,216                          |       | $                      | 10,480     |                                         | $          | 1.75                         |       | $                               | 734        |                  |       |                          | 1.1128     |   | 466,504 |   |
| 7.00% Series H                                |       | 6/30/98              |       | 27,634                           |       | 691                    |       | 1.75                                         |       | 48                           |       |                            |       | 1.4480                |       | 40,014                        |       |
| Preference  Interests:                        |       |                 |       |                             |       |                   |       |                                         |       |                         |       |                            |       |                  |       |                          |       |
| 7.625% Series J                               |       | 12/14/06             |       | 230,000                          |       | 11,500                 |       | 3.8125                                       |       | 877                          |       |                            |       | 1.4108                |       | 324,484                       |       |
| Junior Preference  Units:                     |       |                 |       |                             |       |                   |       |                                         |       |                         |       |                            |       |                  |       |                          |       |
| 8.00% Series B                                |       | 7/29/09              |       | 7,367                            |       | 184                    |       | 2.00                                         |       | 15                           |       |                            |       | 1.020408              |       | 7,517                         |       |
| Total Convertible  Preference Units/Interests |       |                 |       | 684,217                          |       | $                      | 22,855     |                                         |       |                         | $          | 1,674                           |       | 7.32                  | %          |                          |       | 838,519 |   |
|                                               |            |                      |            |                                  |            |                        |            |                                              |            |                              |            |                                 |            |                       |            |                               |            |  |  |  |

 

PerpetualPreference Units as of March 31, 2007

(Amountsin thousands except for unit and per unit amounts)

 
| **Series**                        | ** ** | **Redemption  Date** | ** ** | **Outstanding  Units** | ** ** | **Liquidation  Value** | ** ** | **Annual  Dividend  PerUnit** | ** ** | **Annual  Dividend  Amount** | ** ** | **Weighted  Average  Rate** | ** ** |
|-----------------------------------|------------|----------------------|------------|------------------------|------------|------------------------|------------|-------------------------------|------------|------------------------------|------------|-----------------------------|------------|
| Preference  Units:                |       |                 |       |                   |       |                   |       |                          |       |                         |       |                        |       |
| 8.60% Series D                    |       | 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 | % |
|                                   |            |                      |            |                        |            |                        |            |                               |            |                              |            |                             |            |  |  |  |

 

The OperatingPartnership expects to meet its short-term liquidity requirements, includingcapital expenditures related to maintaining its existing properties and certainscheduled unsecured note and mortgage

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note repayments,generally through its working capital, net cash provided by operatingactivities and borrowings under its revolving credit facilities.  The Operating Partnership considers its cashprovided by operating activities to be adequate to meet operating requirementsand payments of distributions.  The OperatingPartnership also expects to meet its long-term liquidity requirements, such asscheduled unsecured note and mortgage debt maturities, property acquisitions, financingof construction and development activities and capital improvements through theissuance of unsecured notes and equity securities, including additional OPUnits, and proceeds received 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 $17.9billion in investment in real estate on the Operating Partnership’s balancesheet at March 31, 2007, $12.3 billion or 69.1%, was unencumbered.

TheOperating Partnership’s senior debt credit ratings from Standard & Poors (“S&P”),Moody’s and Fitch are A-, Baa1 (positive outlook) and A, respectively.  EQR’s preferred equity ratings from S&P,Moody’s and Fitch are BBB+, Baa2 (positive outlook) and A-, 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 May 4, 2007, $1.26 billion wasoutstanding under this facility.

SeeNote 16 in the Notes to Consolidated Financial Statements for discussion of theevents which occurred subsequent to March 31, 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:

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

**·**                  appliances;

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

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

**·**                  blinds/shades.

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

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

**·**                  roof replacement and majorrepairs;

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

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

**·**                  major building mechanicalequipment systems;

**·**                  interior and exteriorstructural repair and exterior painting and siding;

**·**                  major landscaping andgrounds improvement; and

**·**                  vehicles and office andmaintenance equipment.

**Allbuilding improvements are depreciated over a five to ten-year estimated usefullife.  We capitalize**

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**building improvements andupgrades only if the item: (i) exceeds $2,500 (selected projects must exceed$10,000); (ii) extends the useful life of the asset; and (iii) improves thevalue of the asset.**

**For the quarterended March 31, 2007, our actual improvements to real estate totaledapproximately $57.4 million.  Thisincludes the following (amounts in thousands except for unit and per unitamounts):**

**Capitalized Improvements to Real Estate**

**For the Quarter Ended March 31, 2007**

** **
| ** **                      | ** ** | **Total Units  (1)** | ** ** | **Replacements** | ** ** | **Avg. Per  Unit** | ** ** | **Building  Improvements** | ** ** | **Avg. Per  Unit** | ** ** | **Total** | ** ** | **Avg. Per  Unit** | ** ** |
|---------------------------------|------------|---------------------------|------------|------------------|------------|-------------------------|------------|----------------------------|------------|-------------------------|------------|-----------|------------|-------------------------|------------|
|                            |       |                      |       |             |       |                    |       |                       |       |                    |       |      |       |                    |       |
| Established  Properties (2)     |       | 121,126                   |       | $                | 10,093     |                    | $          | 83                         |       | $                       | 17,230     |      | $          | 142                     |       | $ | 27,323 |   | $ | 225 |   |
| New Acquisition  Properties (3) |       | 23,596                    |       | 1,328            |       | 58                      |       | 15,080                     |       | 660                     |       | 16,408    |       | 718                     |       |
| Other (4)                       |       | 7,196                     |       | 4,028            |       |                    |       | 9,595                      |       |                    |       | 13,623    |       |                    |       |
| Total                           |       | 151,918                   |       | $                | 15,449     |                    |       |                       | $          | 41,905                  |       |      |       | $                       | 57,354     |   |   |   |
|                                 |            |                           |            |                  |            |                         |            |                            |            |                         |            |           |            |                         |            |  |  |  |  |  |  |

 

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(1)          Total units exclude 10,846 unconsolidated units and 3,560 militaryhousing (fee managed) units.

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

(3)          Wholly Owned Properties acquired during 2005, 2006 and 2007.  Per unit amounts are based on a weightedaverage of 22,845 units.

(4)          Includes properties either partially owned orsold during the period, commercial space, corporate housing, condominiumconversions and $4.7 million included in building improvements spent on thirteenspecific assets related to major renovations and repositioning of these assets.

**The OperatingPartnership expects to fund approximately $94.0**million for capitalexpenditures for replacements and building improvements for all established propertiesfor the remainder of 2007.  This includesan average of approximately $1,000 per unit for capital improvements forestablished properties.

**During thequarter ended March 31, 2007, the Operating Partnership’s total non-real estatecapital additions, such as computer software, computer equipment, and furnitureand fixtures and leasehold improvements to the Operating Partnership’s propertymanagement offices and its corporate offices, were approximately $1.7**million.  The Operating Partnership expects to fundapproximately $5.3 million in total additions to non-real estate property forthe remainder of 2007.

**Improvementsto real estate and additions to non-real estate property were funded from netcash 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 the derivativesare designed to hedge, the Operating Partnership has not sustained a materialloss from those instruments nor does it anticipate any material adverse effecton its net income or financial position in the future from the use ofderivatives.

See Note 11 in the Notes to Consolidated FinancialStatements for additional discussion of derivative instruments at March 31,2007.

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***Other***

**Total distributions paid in April2007 amounted to $151.6 million (excluding distributions on Partially OwnedProperties), which included certain distributions declared during the firstquarter ended March 31, 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 and2001, the Operating Partnership entered into institutional ventures with anunaffiliated partner.   At the respectiveclosing dates, the Operating Partnership sold and/or contributed 45 propertiescontaining 10,846 units to these ventures and retained a 25% ownership interestin the ventures.  The OperatingPartnership’s joint venture partner contributed cash equal to 75% of theagreed-upon equity value of the properties comprising the ventures, which wasthen distributed to the Operating Partnership. The Operating Partnership’s strategy with respect to these ventures wasto reduce its concentration of properties in a variety of markets.

**As ofMarch 31, 2007, the Operating Partnership has ten projects totaling 3,228 unitsin various stages of development with estimated completion dates rangingthrough June 30, 2009.  The developmentagreements currently in place are discussed in detail in Note 14 of theOperating Partnership’s Consolidated Financial Statements.**

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

**TheOperating Partnership’s contractual obligations for the next five years andthereafter have not changed materially from the amounts and disclosuresincluded in its annual report on Form 10-K, other than as it relates to scheduleddebt maturities.  See the updated debtmaturity schedule included in Liquidity and Capital Resources for furtherdiscussion.**

**CriticalAccounting Policies and Estimates**

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

*Impairment of Long-Lived Assets,Including Goodwill*

The Operating Partnership periodically evaluates itslong-lived assets, including its investments in real estate and goodwill, forindicators of permanent impairment.  Thejudgments regarding the existence of impairment indicators are based on factorssuch as operational performance, market conditions, expected holding period ofeach asset and legal and environmental concerns.  Future events could occur which would causethe Operating Partnership to conclude that impairment indicators exist and animpairment loss is warranted.

*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

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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.

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

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of the fair value of its share options and the actual value of theoptions may be significantly different.

**FundsFrom Operations**

**For the quarter ended March 31,2007, Funds From Operations (“FFO”) available to OP Units decreased $1.4million, or 0.8%, as compared to the quarter ended March 31, 2006.**

The following is a reconciliation of net income to FFOavailable to OP Units for the quarters ended March 31, 2007 and 2006:
|                                                                    | ** ** | **Quarter Ended March 31,** | ** ** |
|--------------------------------------------------------------------|------------|--------------------------------------------|------------|
| ** **                                                         | ** ** | **2007**                                   | ** ** | **2006** | ** ** |
| Net income                                                         |       | $                                          | 134,346    |   | $ | 405,548 |   |
| Adjustments:                                                       |       |                                       |       |   |   |
| Depreciation                                                       |       | 152,821                                    |       | 128,676 |   |
| Depreciation – Non-real estate additions                      |       | (2,035                                     | )          | (1,796 | ) |
| Depreciation – Partially Owned and Unconsolidated  Properties |       | 943                                        |       | 1,550 |   |
| Net gain on sales of unconsolidated entities                       |       | —                                     |       | (329 | ) |
| Discontinued operations:                                           |       |                                       |       |   |   |
| Depreciation                                                       |       | 1,853                                      |       | 18,047 |   |
| Net (gain) on sales of discontinued operations                     |       | (111,767                                   | )          | (372,501 | ) |
| Net incremental gain on sales of condominium units                 |       | 4,692                                      |       | 7,127 |   |
| Provision for income taxes – Non-condo sales                  |       | (187                                       | )          | — |   |
|                                                               |       |                                       |       |   |   |
| FFO (1)(2)                                                         |       | 180,666                                    |       | 186,322 |   |
| Preferred  distributions                                           |       | (7,647                                     | )          | (11,194 | ) |
| Premium on  redemption of Preference Interests                     |       | —                                     |       | (674 | ) |
| FFO available to  OP Units                                         |       | $                                          | 173,019    |   | $ | 174,454 |   |

 

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***(1)****      **The National Association of Real Estate Investment Trusts (“NAREIT”)defines funds from operations (“FFO”) (April 2002 White Paper) as net income(computed in accordance with accounting principles generally accepted in theUnited States (“GAAP”)), excluding gains (or losses) from sales of depreciableproperty, plus depreciation and amortization, and after adjustments forunconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures will becalculated to reflect funds from operations on the same basis.  The April 2002 White Paper states that gainor loss on sales of property is excluded from FFO for previously depreciatedoperating properties only.  Once theOperating Partnership commences the conversion of units to condominiums, itsimultaneously discontinues depreciation of such property.*

***(2)****      **The Operating Partnership believes that FFO is helpful toinvestors as a supplemental measure of the operating performance of a realestate company, because it is a recognized measure of performance by the realestate industry and by excluding gains or losses related to dispositions ofdepreciable property and excluding real estate depreciation (which can varyamong owners of identical assets in similar condition based on historical costaccounting and useful life estimates), FFO can help compare the operatingperformance of a company’s real estate between periods or as compared todifferent companies.  FFO does notrepresent net income or net cash flows from operating activities in accordancewith GAAP.  Therefore, FFO should not beexclusively considered as an alternative to net income or to net cash flowsfrom operating activities as determined by GAAP or as a measure of liquidity.  The Operating Partnership’s calculation ofFFO may differ from other real estate companies due to, among other items,variations in cost capitalization policies for capital expenditures and,accordingly, may not be comparable to such other real estate companies.*

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**Item 3. Quantitative andQualitative Disclosures About Market Risk**

**The Operating Partnership’smarket risk has not changed materially from the amounts and informationreported in Item 7A, *Quantitative andQualitative Disclosures About Market Risk*, to the OperatingPartnership’s Form 10-K for the year ended December 31, 2006.  See also Note 11 in the Notes to ConsolidatedFinancial Statements for additional discussion of derivative instruments.**

**Item 4. Controls andProcedures**

**(a) Evaluation of DisclosureControls and Procedures:**

**Effective as of March 31, 2007, theOperating Partnership carried out an evaluation, under the supervision and withthe participation of the Operating Partnership’s management, including theChief Executive Officer and Chief Financial Officer of EQR, of theeffectiveness of the Operating Partnership’s disclosure controls and procedurespursuant to Exchange Act Rules 13a-15 and 15d-15.  Based on that evaluation, the Chief ExecutiveOfficer and Chief Financial Officer concluded that the disclosure controls andprocedures are effective to ensure that information required to be disclosed bythe 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 internal control overfinancial reporting of the Operating Partnership identified in connection withthe Operating Partnership’s evaluation referred to above that occurred duringthe first quarter of 2007 that have materially affected, or are reasonablylikely to materially affect, the Operating Partnership’s internal control overfinancial reporting.**

**PART II.        OTHERINFORMATION**

**Item 1.  LegalProceedings**

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 Operating Partnership believes it has anumber of viable defenses, including that a majority of the named propertieswere completed before the operative dates of the statutes in question and/orwere not designed or built by the Operating Partnership.  Accordingly, the Operating Partnership isdefending the suit vigorously.  Due tothe pendency of the Operating Partnership’s defenses and the uncertainty ofmany other critical factual and legal issues, it is not possible to determineor predict the outcome of the suit and as a result, no amounts have beenaccrued at March 31, 2007. While no assurances can be given, the OperatingPartnership does not believe that the suit, if adversely determined, will havea 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.

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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 theOperating 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 Units Repurchasedin the Quarter Ended March 31, 2007*

The Operating Partnership repurchased the following OP Units during thequarter ended March 31, 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)** | ** ** |
|--------------------|------------|------------------------------------------------------------------|------------|----------------------------------------------------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------|------------|
|               |       |                                                             |       |                                                     |       |                                                                                                                                                 |       |                                                                                                                                              |       |
| February 2007      |       | 786,254                                                          |       | $                                                        | 50.80      |                                                                                                                                                 | 786,254    |                                                                                                                                              | $          | 461,831,676 |   |
| March 2007         |       | 3,354,000                                                        |       | $                                                        | 48.29      |                                                                                                                                                 | 3,354,000  |                                                                                                                                              | $          | 299,881,328 |   |
| First Quarter 2007 |       | 4,140,254                                                        |       | $                                                        | 48.76      |                                                                                                                                                 | 4,140,254  |                                                                                                                                              |       |   |

 

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**(1)**          The OP Units repurchased during the quarter ended March 31, 2007represent OP Units redeemed in response to repurchases of Common Shares underthe Company’s publicly announced share repurchase program approved by its Boardof Trustees.  Of the total sharesrepurchased, 80,054 shares were repurchased at an average price of $54.37 pershare to cover the minimum statutory tax withholding obligations related to thevesting of employees’ restricted shares. The remaining 4,060,200 shares were repurchased in the open market at anaverage price of $48.65 per share.  As ofMarch 31, 2007, transactions to repurchase 1,245,100 of the 4,140,254 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. As a result under this program, the Company may repurchase in openmarket or privately negotiated transactions up to $500.0 million of its CommonShares, of which the same amount remains available at April 27, 2007 ($299.9million was remaining at March 31, 2007 prior to the authorization increase).

**Item 6.    Exhibits–**See the Exhibit 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 behalf by theundersigned thereunto duly authorized.
|        | ERP OPERATING LIMITED PARTNERSHIP |
|--------|-----------------------------------|
|   | BY: EQUITY RESIDENTIAL            |
|   | ITS GENERAL PARTNER               |
|   |                              |
|   |                              |   |
| Date:  | May 9, 2007                       |   | By: |   | /s/ Donna  Brandin |
|   |                              |   | Donna Brandin |
|   |                              |   | Executive Vice  President and |
|   |                              |   | Chief Financial  Officer |
|   |                              |   |   |
|   |                              |   |
| Date:  | May 9, 2007                       |   | By: |   | /s/ Ian S. Kaufman |
|   |                              |   | Ian S. Kaufman |
|   |                              |   | First Vice  President and |
|   |                              |   | Chief Accounting  Officer |
|        |                                   |  |  |  |  |  |  |

 

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**EXHIBITINDEX**

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    |       | Amendment to Revolving Credit Agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |       | Included as Exhibit 10.1 to the Company’s Form 10-Q  for the quarterly period ended March 31, 2007.  |
|    |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |       |                                                                                                      |
| 10.2    |       | Revolving Credit Agreement dated as of February 28,  2007 among ERP Operating Limited Partnership, Bank of America, N.A., as administrative  agent, JPMorgan Chase Bank, N.A., as syndication agent, Banc of America  Securities LLC and J.P. Morgan Securities Inc., as joint lead arrangers and  joint book runners, Suntrust Bank, Wachovia Bank, National Association, Wells  Fargo Bank, N.A., LaSalle Bank National Association, The Royal Bank of  Scotland plc, and US Bank National Association, as co-documentation agent,  and a syndicate of other banks (the “Credit Agreement”). |       | Included as Exhibit 10.1 to the Company’s Form 8-K  dated February 28, 2007, filed on March 5, 2007. |
|    |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |       |                                                                                                      |
| 10.3    |       | Guaranty of Payment made as of February 28, 2007  between Equity Residential and Bank of America, N.A., as administrative agent  for the banks party to the Credit Agreement.                                                                                                                                                                                                                                                                                                                                                                                                                            |       | Included as Exhibit 10.2 to the Company’s Form 8-K  dated February 28, 2007, filed on March 5, 2007. |
|    |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |       |                                                                                                      |
| 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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